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STANDING COMMITTEE ON FINANCE

COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, November 1, 2001

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[English]

The Chair (Mr. Maurizio Bevilacqua (Vaughan—King—Aurora, Lib.)): I would like to call the meeting to order and welcome everyone here this afternoon.

We are undertaking a pre-budget consultation, pursuant to Standing Order 83.1. As you know, we've travelled across the country seeking public input from Canadians and certainly benefited a great deal from that particular experience. They have provided us with valuable insight, and I'm sure this panel will do the same. As you know, you have approximately five to seven minutes to make your presentation. Thereafter, we'll engage in a question and answer session.

These are the groups that will be appearing today: the Partnership Group for Science and Engineering; Environmental Science and Technology Alliance Canada; the Retirement Income Coalition; the Canadian Venture Capital Association; the National Round Table on the Environment and the Economy; and we're also awaiting the Canadian Labour Congress.

We'll begin in the order in which the name appears in the agenda, so we'll begin with the Partnership Group for Science and Engineering, the chair, David Kenny and the past chair, Dr. Howard Alper. Welcome.

Mr. David Kenny (Chair, Partnership Group for Science and Engineering): I'm David Kenny, the chair of the Partnership Group. We're a cooperative association of 24 national science and engineering associations under the auspices of the Royal Society. We provide science and technology policy analyses, which we co-host with Industry Canada. We have a series of other activities, such as the Bacon-and-Eggheads Breakfast on Parliament Hill every month on a science subject for parliamentarians. We hold an annual symposium every October. The recent one was “Research: the Key to Canada's Well-being” on health and cancer research. We also make these submissions, of course, to the House of Commons finance committee, and we have a committee to advance research, which is an industry-university coordination.

There are four major issues we're concerned about. The first one is science and technology policy formulation. We're pleased to see the formation of the House of Commons Standing Committee on Science and Innovation, but we would recommend a separation of science and innovation from industry, because industry is often concerned with issues other than science, such as trade and commerce.

We also recommend the formation of a PMO office of science and innovation to provide knowledge and background in this important area, with the way world trade is developing. It would also provide expert knowledge for the executive arm of government and could work with the House of Commons committee.

We also recommend that the current Secretary of State for Science, Research and Development become a minister of science and innovation, which would allow an objective coordination of the national funding of science and a separation of industry policy from science and research funding.

We are pleased to see we are close to the formation of the Canadian academies of science, which are bodies that will allow an independent and knowledgeable review of science and technology issues in Canada and would also provide an international standing for science in Canada.

An area we're very concerned about with the current development of world trade is the global competitiveness of industrial research. Under this heading we're particularly concerned about the knowledge-based industries, which are the key to first-world status in the 21st century. Many of the other OECD countries have already recognized this and are busy supporting and funding their knowledge-based industries. Developing nations are busy recognizing this as well.

Of particular concern is the high level of funding in other OECD countries of R and D funding for these industries—on the order of 80% to 100%. Currently in Canada most of this funding comes from TPC at the level of 30%, with a requirement for payback—which is not a requirement in the other OECD countries.

On the other side, we must recognize the world-class level of tax credits in Canada, but we still have to recognize the issue of support for R and D. We should particularly remember that many of these companies are investing their full worth in many of their products.

The other issue has to do with the small to medium-sized enterprises, which suffer from low capital margins and heavy global competition.

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Related to this is the indirect cost of research for universities. We recognize the value of the Canada Foundation for Innovation Research and of new equipment for the universities, which has allowed them to renew and purchase new equipment to give them world-class capability in research.

This leads to the next issue of how do they operate this equipment? This is where the indirect costs come in. The current OECD norm is on the order of 50%. We're recommending that Canada start with an initial 25% to 30%, and then over the next few years work up to 40%. This will help the universities considerably.

Another related subject is the funding of the research granting councils, which provide much of the research funding in the universities. We recognize the government's policy to raise Canada from fifteenth to fifth, in terms of research investment, on the global scene. NSERC is currently suffering from a funding issue, because over the past year, and probably over the next few years, there's been a 25% per year increase in requests from new professors and researchers. This is as a result of enrolment and retirements.

The other issue is a multi-year funding profile. Today they receive funding on only a year-by-year basis, but much of the research is done on a two-to-five-year span and requires commitments in salaries and equipment over a longer term. This is important to the knowledge-based industries, because many of them are now turning to post-grad hiring to increase their capability. They need the output of the advanced-degree graduates from the universities.

That's it.

The Chair: Thank you.

From the Environmental Science and Technology Alliance Canada, the executive director, Mr. McDowell, and Jack Pasternak, Environmental Technology Innovations Canada.

Mr. Jack Pasternak (Executive Director, Environmental Technology Innovations Canada): Thank you very much for having us here today.

My name is Jack Pasternak, and Al McDowell is my partner here. We wish to enlist your help in achieving matched federal government funds to support ETIC, or Environmental Technology Innovations Canada, which is the new successor to ESTAC.

In the ETIC mode of operation, the mission is to accelerate the commercialization of world-class, innovative Canadian research in the area of environmental quality and sustainable development. In doing so, it leverages public sector funds with private sector funding, with the combined amount going to Canadian universities. This is done by having member companies specify research needs every year, sending out requests for research proposals to Canadian universities every year, and having university professors propose research to meet industrial needs. Scientific projects with maximum commercial potential are the ones that are funded. Graduate students carry out the research. Companies use the knowledge in any way appropriate, but the intellectual property is owned by universities and professors.

ETIC has been incorporated to provide new, innovative university research. ETIC fits into the middle of the R and D continuum, where university professors deliver on industry needs. Universities work at the fundamental-science end, carrying out basic research funded by NSERC and CFI. The industries work at the commercialization-technology end and can access funding on loans from TPC, NRC, IRAP, or the new Strategic Technology Development Fund. These organizations will not fund broad partnerships, such as ETIC, operating in the transitional phase of the R and D continuum. Thus ETIC bridges the gap between government funding for the early-stage and later-stage research.

ETIC builds upon our previous experience. The predecessor organization, which was ESTAC, started up in 1985 and terminated earlier this year, in 2001. The reasons were that there has been no matched block of government funds since 1999, and the organization was not yet big enough to self-leverage—that is where every project is funded by two or more companies. Because of this, the smaller companies felt the economic impact earliest and have left us first. Larger companies then prefer to fund universities independently, in the absence of self-leveraging or matching block funds.

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However, these companies are still willing to start a new partnership if the federal government participates, and have agreed to provide start-up funds and are willing to work towards self-leveraging in seven years. What we're asking for is a matching block of federal government funds of $10 million over seven years to create a synergistic partnership with technical and financial signatories.

Mr. Al McDowell (Executive Director, Environmental Technology Innovations Canada): If you're following along in our handout, the next page is a list of the members who are providing us with seed money and encouragement to come to you today to seek another block of funding. Our membership would grow rather rapidly if that funding were achieved.

On the following page, we have listed five examples of the research we have funded. I would just like to talk to a couple of them to give you an idea how we operate, the first one being at bullet two.

In response to a number of our industrial members who had a problem of soil contaminated with heavy metals, we had a response from horticulturalists from the University of Guelph who proposed looking at scented geraniums to remove toxic metals from the soil. They've done this. It's been patented, and actually there are some field trials underway. It's quite successful. The great advantage of this is that you're not digging up the soil. The scented geraniums are very unattractive to rabbits and squirrels, so they don't eat them and then don't get contaminated. At the end of the year you just harvest the crop, and you can burn it and recover the metals.

The very last bullet is an example of how we develop synergy. The oil sands companies are looking at rebuilding after they mine the oil sands, and that will include wetlands. They were interested in having some ecosystem studies done on the reclaimed wetlands. We set out our proposal and had a number of proposals come back, four of which were chosen: the universities of Saskatchewan, Windsor, Simon Fraser, and Waterloo. They're all working together to determine the health of insects, birds, and small animals on the reclaimed wetlands. As well, as a consequence of this project, we have the four potash companies who are members interested in pursuing wetlands.

Over the 16 years we've been operating, we've funded 192 projects. As a matter of fact, we've funded several projects by Professor Alper, who is also presenting here today. We've spent $27 million, $8.5 million of which was government money, $8.5 million industry money—which we matched—and the professors were able to go back to NSERC and on a project-by-project basis receive money. Seven hundred graduate students were educated in Canada. That helps to maintain them in Canada for our companies. We also promoted the networking between leading companies and universities.

Mr. Jack Pasternak: In summary, our request is for a new government block of funds, which would be matched by industry, to support innovative research with high commercial impact at Canadian universities. A sum of $10 million over seven years would encourage Canadian-based development of university environmental research, would enable self-leveraging and self-sufficiency to be achieved, and would meet the throne speech commitment to strengthen Canadian research capacity.

Without one final block grant for ETIC, the unique partnership approach pioneered over the past 16 years will not survive, and large synergistic opportunities will be lost to the government. Please do not let this happen.

Thank you.

The Chair: Thank you, Mr. Pasternak and Mr. McDowell.

We'll now hear from the Retirement Income Coalition, Mr. Pielsticker and Mr. Malcolm Hamilton. Welcome.

Mr. C.A. (Charlie) Pielsticker (Chair, Retirement Income Coalition): Thank you very much. It's a pleasure to be here, and we thank you for the opportunity of being here again and meeting together with you.

First of all, I want to make sure everyone understands that we understand the economic situation all of us are in these days. But in coming forward let me give you a brief background of the Retirement Income Coalition, which is currently made up of 15 organizations, very broadly based. That base includes groups such as the Canadian Real Estate Association, the Canadian Association of Retired Persons, the Canadian Teachers Federation, and the Conference for Advanced Life Underwriting and the Canadian Association of Insurance and Financial Advisors.

In the presentation we are making here, we are putting forward a proposal to increase the contribution limits for both RRSP and registered pension plans. The increase in RRSPs would be from the current base of $13,500 up to $27,000 a year, and the increase in the contribution limit for defined pension plans would be up to $3,000 per year.

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The Retirement Income Coalition was formed approximately four years ago to work cooperatively with government on a mutually agreed-upon pension retirement system.

It goes back to the 1982 green paper, which was presented by Marc Lalonde and Monique Bégin. At that time the three principles of that recommendation were: number one, to guarantee a basic income for those without resources of their own; number two, to assure fair opportunities for Canadians to provide for their retirement years; and number three, to enable Canadians to avoid a serious disruption in their standard of living upon their retirement. That was back in 1982.

If the proposals of that report had been enacted, pension plans would now cover earnings up to $250,000 and an equivalent contribution to an RRSP and pension plans would be $45,000 per year.

By freezing the limit to the current $13,500, middle-income Canadians are now included in the people who are adversely affected by our current funding limits. In the research done by members of the coalition, the list of people who are now adversely affected by the limits would include registered nurses, school administrators, chief librarians, and a number of other people named in the submission.

If that is our foundation, then where do we go? What has or has not changed from 1976 to the current position in 2001?

Malcolm.

Mr. Malcolm P. Hamilton (Principal and Benefits Consultant, William M. Mercer Ltd.; Representative, Retirement Income Coalition): Thanks, Charlie.

Before leading you quickly through three exhibits, I'd just like to remind those of you who don't focus on these things of the history of this issue. I've been a consultant to pension plans in Canada for 22 years now. When I was a relatively young consultant, the government of the day put together a white paper and said that everybody should have fair access to retirement savings plans. One of the problems in Canada is that the RRSP limit is too low relative to the pension limit. We're going to bring the RRSP limit up to the pension limit, and then we're going to index them both. In the late eighties the plan was to bring the RRSP limit to $15,500 in 1990 and then index the RRSP and the pension limits. In 1989 draft legislation came out, and 1990 had been pushed to 1995. The legislation was passed. Two years later the 1995 was pushed to 1996. The 1996 was then pushed to 1999. The 1999 was then pushed to 2005. So we've had as a consequence limits that have been frozen for a very long time.

Let me tell you what that does. I don't know whether it does this intentionally or inadvertently. In our submission is a table that looks at how much has changed in the retirement income system in Canada in the last 25 years. I'm not going to belabour all the points individually, but there's a pattern. The pattern is that pensions that get paid by government, whether they're paid to members of Parliament, civil servants, Canada Pension Plan beneficiaries, OAS recipients, or low-income Canadians under the GIS, are all up 200% to 400%. When I look at the retirement savings limits for people who save for their own retirement, they are up 0% to 150%. That's a big gap.

We're not here to criticize the 200% to 400%. That's largely driven by changes in wages and the cost of living. But we think that people who save for their own retirement shouldn't be treated as second-class citizens. Their opportunities should increase just like everybody else's.

A second consequence of the large freeze is relative to the countries with whom Canadians would most naturally compare. We are way behind.

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If you look at executives or at self-employed, successful entrepreneurs in the U.S. or U.K., they can set money aside for retirement on incomes up to $200,000 to $300,000 Canadian. By comparison, the Canadian limit is $75,000. That means not only are we at one-quarter of what we used to be in real terms, but we're at one-third to one-quarter of the limits you find today in the U.S. and the U.K.

The last point I want to address is financial consequence. As Charlie pointed out at the beginning, we are acutely aware this is probably not the right year for the government to run around throwing money. But we're asking everyone to remember that this is largely revenue deferred, not revenue foregone. When people put money into an RRSP, the government loses tax revenue in that year, but there's no way to get the money out. The money will come out some day, maybe 20 years from now, but when the money comes out it's going to be taxed at a good, healthy rate. Basically all the revenue foregone will be collected later, with interest.

Professor Robert Brown put together this chart recently looking at the government's investment in the retirement savings system. It shows that right now, with aging baby boomers in their prime years, the government is in essence investing by allowing those individuals to defer tax. If you roll the clock forward 20 to 30 years, the government is going to be collecting.

Our view is that it is preferable in this instance to defer tax revenue for the 20 to 30 years, because if we think we have problems with affordable medicare today, wait until you take this population and age it 20 to 30 years; see what the bills are going to look like then. If you're sitting in a situation where 40% of your taxpayers are retired, and because they didn't defer any income none of them have very good incomes, and we're sitting on a progressive tax system where we get an awful lot of money from people with high incomes, and mix that together with big medical bills, I just don't think it balances.

The Chair: Thank you very much.

Now we'll hear from the Canadian Venture Capital Association, the president, Mr. John Eckert, and John Bradlow. Welcome.

Mr. John F. Eckert (President, Canadian Venture Capital Association): Thank you very much for the opportunity to present today. My name is John Eckert, and I'm president of the Canadian Venture Capital Association. In my day job I'm also a founder and managing partner in McLean Watson Capital, a Toronto-based venture firm focused on the information technology sector. We also have offices in Ottawa.

With me is John Bradlow, who heads up the public policy committee of the Canadian Venture Capital Association. John is also in the private equity market, as a principal and senior partner at Penfund Management Limited, which is directed more to later stage, but still private, equity investing.

The Canadian Venture Capital Association represents the vast majority of players and moneys directed to the venture and private equity sectors. To put that in perspective, we represent about $20 billion, of which, in 2000, we invested about $6.3 billion. It'll be down from 2000 in 2001, likely coming in at around $5 billion, but it's still a very significant sum. It's also an industry that has grown quite dramatically over the past five years or so.

In our mandate we represent a number of different issues, although at the top of the list is our involvement with government and regulatory authorities, with a view to removing the barriers and dealing with some of the tax issues that retard, in our view, the development of the entrepreneurial sector in Canada, as well as the environment for investing. Just to be clear, our group invests in companies that are private. We work with those companies, with a view to getting them to the next stage of growth and success, which would likely entail either a public offering or a sale to a larger player.

We have about 120 members, and they consist of private venture funds, such as McLean Watson Capital and Penfund Management Limited. They also include bank-owned investors, labour-sponsored funds, corporate investors, as well as foreign and direct institutional investors.

In our materials we have set out both the problems and our recommendations as to how these problems can be solved. We have limited time today, so we won't go into detail on all of them. We'll address only the first two, which deal with access to domestic institutional investment and the ability to raise money from foreign sources.

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I'll turn it over the John shortly, to discuss the domestic pension situation, but I think it's important to understand that we view our role as being within a global marketplace. Canada has to compete for both capital and people globally, but specifically with the U.S. So we are competing with the U.S. for both personnel talent and flow of capital. In other words, money goes where the opportunities are.

We also see our mandate as being good for Canadians everywhere. So although we represent largely the information technology and life sciences sectors, we believe very strongly that the changes we have recommended will be good for Canadians, wherever they may be geographically, at whatever level of professionalism or standard of living.

John.

Mr. John Bradlow (Director and Chair, Public Policy Committee, Canadian Venture Capital Association): Mr. Chairman, I'd like to repeat the point made by my colleague that we're not here to ask for government funding, nor do we believe our proposals will have any effect on tax revenues except, ultimately, a positive effect. What we are asking for is the removal of certain barriers contained in the Income Tax Act, and in the regulations to that act, that have the effect of limiting and reducing the flow of funds into small and emerging Canadian enterprises.

We deal with those barriers principally in the first two points of our written submission. I'll summarize them very briefly. They have the effect of making it difficult for Canadian pension funds, which represent the principal source of these moneys that are devoted to small business, from investing in them. Secondly, they have the effect of discouraging, in the main, U.S. pension funds from investing in small and mid-sized Canadian businesses.

I won't go into the detail of precisely how the tax act does that. It is contained in our submission, and we can deal with it in questions you may care to ask.

The Chair: Thank you very much.

We'll now hear from the National Round Table on the Environment and the Economy, president and CEO David McGuinty, and its chairman, Dr. Stuart Smith. Welcome back.

Dr. Stuart Smith (Chairman, National Round Table on the Environment and the Economy): Thank you very much, Mr. Chairman. It's nice to be back.

To speak briefly, we first of all want to recognize that post-September 11, and with the downturn in the economy, we do not expect that everything we're asking for is going to be immediately funded. We're looking for a phased-in approach. We want to let this committee know there are issues out there that still need attention; however, we expect that the attention will be moderate, at best, in current circumstances.

There are four particular areas where we've been doing work, and we want to report on opportunities for the federal government to show leadership in those areas. Let me just say there's a general approach we want to talk about beforehand.

The flag of sustainable development cannot be pulled down because of the horrific events we've gone through. We may not salute that flag with exactly the same enthusiasm we might have shown in other circumstances, but sustainable development is with us all the time, and must be part of everything we do.

One of the main approaches we're looking at in the national round table—as you know, we've been appointed by the Prime Minister to look at matters of this kind—is market-based instruments. The last time we were at this committee we emphasized emissions trading as a market-based instrument. We are now looking at ecological fiscal reform—that is, the reform of the tax system to tax things that are harmful to the environment—rather than taxing and taking away taxes of an equivalent amount from those things that are useful to the economy, such as job creation and investment. The work on ecological fiscal reform is proceeding, and we hope to have recommendations for you soon.

There are four key areas we have done work on, which we want to report on very briefly today because we think there are important opportunities for the federal government.

I'll ask my colleague, our president, David McGuinty, to talk about the first one.

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Mr. David J. McGuinty (President and CEO, National Round Table on the Environment and the Economy): Thank you, Stuart.

Mr. Chairman, thank you very much.

The first topic has to do with a report we released about six months ago. It is the culmination of three years' work in the western Arctic, where the round table built a team of 14 individuals as a committee, including four chiefs, the two CEOs of the operating diamond mine companies in the northwest, and a number of oil and gas executives, environmentalists, labour leaders, and citizens. They got together and looked at the state of play on the speed at which investment was occurring in the non-renewable resource sector in the western Arctic, namely the Northwest Territories.

Discussions are now being pursued on a pipeline through the Northwest Territories as opposed to an Alaskan route, and price differentials and investment tax credits are being argued for by the Governor of Alaska in Washington. Therefore, we have come up with a series of recommendations that will achieve the proper balance between further exploiting those non-renewables and keeping in mind the aboriginal communities that live there who have an important stewardship role to play with respect to that economy, their ecology, and their own cultures and societies.

Having involved dozens of chiefs and private sector players, environmentalists and others, including the federal and territorial governments, we have made a series of recommendations in three critical areas.

The number one issue that came to the fore over and over again from all players in the Northwest Territories was the question of capacity. Aboriginal communities are simply not in a position to benefit from and participate in the new wage economy and the new opportunities because of the capacity crisis in their communities—namely, 18- to 48-year-old men. There are recommendations here that speak to the question of investing in that capacity.

Second was the capacity of the existing regulatory regimes to do their jobs. The Mackenzie Valley Environmental Impact Review Board, for example, has the right standards. Nobody during our three-year journey said we ought to be tweaking or changing environmental assessment regulations or requirements. They have said it will be an impediment to doing business in the Northwest Territories if we do not invest in the regulatory regimes and the boards—land, water, and otherwise—that exist there. This is slowing down our ability to make the deals we need to foster that exploitation.

Third, there is a real opportunity here to achieve a balance. It has to do with addressing ecological concerns—namely, the question of cumulative environmental assessment and monitoring. In other words, what effect are all these actions having on the sensitive tundra and the sensitive communities that are there? We believe with this series of recommendations—and there are 17 in total—we have an opportunity to achieve what Mr. Justice Berger called for in 1975.

Thank you.

Dr. Stuart Smith: I'll just talk about the other three areas in which we've done work.

First is the linkages between environment and human health. We did a very large amount of work with hundreds of participants from the environmental sector, the health sector, the business sector, the chemical industry, government, and the academic sector. It became very clear that we have a great many chemicals in our environment that simply need to be better measured and better monitored. We also need more information about them, particularly their effect on human health in combinations, not just one at a time, and on systems that are not normally tested.

We normally test for cancer, but we don't usually test for the effect on the immune system, the nervous system, and, more recently, the endocrine system. So there's work that needs to be done, and we suggest particularly continuation of the toxic substances research initiative funding. I know your committee has looked at that before.

We recommend that there be an environment and human health strategic research initiative within the Canadian Institutes of Health Research, and additional funding for regulatory capacity within Environment Canada and Health Canada.

Another place we're doing work is in preserving Canada's natural heritage. This committee has heard us before call for the completion of the national parks system. We imagine that in the current circumstances this may not be the year to do the whole thing, but we'd certainly like to see some movement in that direction.

There is also the opportunity within cities to deal with the brownfields, which are contaminated sites in the middle of cities. They're potentially very valuable lands. They sit there continually undeveloped because of the impasse with respect to the risks of funding, the need for standards of cleanliness, and so on.

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This is a provincial issue to a large extent, but there's room for federal leadership here, particularly with tax policy changes to give companies the opportunity to take an option to offset the costs of cleanup against their revenues in the year in which these costs are incurred. We ought to give companies the option to either capitalize those costs or expense them. Right now, they don't have that option; they're not allowed to expense them. This is one of the things that stands in the way of these sites being cleaned up and put to productive use.

Secondly, we'd like to see an investment tax credit similar to the one for R and D given for site remediation. There are also certain federal liens on orphaned brownfield sites where the lien is encumbering redevelopment. We feel it's possible for the CMHC to provide mortgage guarantees and also for the provinces and federal government together to create a capital fund, possibly a revolving loan fund, or grants to municipalities in order to move ahead.

We're way behind the United States in our abilities to develop brownfields. Our financial institutions keep telling us this. We find ourselves with important lands undeveloped in the middle of cities, and we end up with more urban sprawl as a consequence of that. We're missing the tax money we could be receiving from these lands. We're missing the useful jobs that could be created there. And it's all because of this impasse with respect to who's going to take the risk in the event that some day somebody finds the cleanup was done to a standard that 10 years or 100 years from now we may think wasn't good enough. There are ways to deal with it. The Americans have done it, and we must do that as well.

Those are the points I wanted to raise. Thank you.

The Chair: Thank you very much, Dr. Smith and Mr. McGuinty.

We'll now proceed to the Q and A.

Mr. Jaffer, you have seven minutes.

Mr. Rahim Jaffer (Edmonton—Strathcona, Canadian Alliance): Thank you.

Thank you all for your presentations today.

I'd like to start with a question to the science and engineering and environmental science groups that made their presentations today.

I come from a riding that has the University of Alberta in it, so I'm quite close to a lot of the work they're doing, especially when it comes to commercialization in their industry-liaison department, and some of the work has been very positive on that front. However, with all that's done there, there's no doubt there needs to be a serious commitment to basic research as well. You can't rely just strictly on the innovation of industry and universities.

There's one thing I'm curious about, and maybe you could enlighten us on this. In the House, the finance minister has boasted in the past that we have some of the most aggressive R and D tax credit programs to try to stimulate investment when it comes to universities and industry. Yet when you talk to a lot of the universities, they still say it's often very difficult to get that interest from some of the industry players.

I'd like to know what deficiency you see within that area, how the government could change public policy to facilitate further working relationships with industry. Because obviously, outside of having a basic research commitment, which we'd like to see, I think the more you can strengthen industry relationships, the better it's going to be for the process of commercialization and for future relationships in industry.

So maybe you could take a moment to explain the deficiencies there.

Mr. David Kenny: First of all, just to say something about the tax credit program, many of the high-tech industries in Canada recognize the value of this program; however, other countries have them too. It's only a part of the total effective support that a high-tech industry might get in any country.

In Canada, we have TPC. Their funding system, as I pointed out, is relatively low compared to what other countries do. On the other hand, many companies, including the one I'm associated with, Pratt & Whitney in Montreal, go out of their way to work with universities, and they use the TPC funding to fund work in the universities.

I think it's not so much a deficiency as it's not enough. The real issue is that we need more funding, and I don't think there's a problem tying it to working with the universities. I don't think the high-tech companies would have a problem with that. But if you make comparisons with other major countries with high-tech industries, like Europe, Japan, and the U.S., you'll find they have higher levels of funding and you may find parts of it are tied to working with universities. In other words, the companies are required to work with a university.

So I don't think there's a deficiency in concept. I think the deficiency is in amount. This affects the competitiveness of both the companies and the universities, because obviously somebody else is getting better support. They have more money for development or for doing research.

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Mr. Al McDowell: I think we actually do quite a bit of funding at the University of Alberta, and there are a number of Alberta companies that deal with the University of Alberta on an ongoing basis. But what we would like to see is some kind of mechanism to keep people talking. There's a lot of good university research done in Ontario and Quebec that would apply to what goes on in Alberta, and there are Ontario companies that should be talking to Alberta.

Jack and I come from both research and industry, and we know that even though you're a researcher, there's a tendency to sort of hold back a little when you're talking to universities, and vice versa. So I encourage 100% that you should give more money to basic research but also, I think, some of these things that would just build the structure to get people talking—not necessarily us, but anything else you can think of doing.

I think our model has been a good one. We've had a lot of horticulture researchers at universities talking to chemical companies, and they never would do that normally.

Mr. Jack Pasternak: Even within universities themselves, somebody in the horticultural department generally does not talk as fluently as he might to somebody in the chemical engineering or the chemistry department.

By issuing research proposals, we get all these suggestions back, and we're able to put together teams that can work with industry teams to solve a particular problem. This is where we're working in the intermediate stage of the research continuum, and we think it's really important to continue that kind of research. We couldn't agree with you more.

The Chair: Dr. Alper.

Dr. Howard Alper (Past Chair, Partnership Group for Science and Engineering): I have just a brief comment. I would endorse what David Kenny had to say, but also, as a university vice-president in research, responsible for ILO or that type of operation, I can say that in order to get development and commercialization, you have to have discovery. And for that, you really need a healthy support of the research base.

Once you have a new invention or discovery, and transfer the technology, either to an existing industry, or, as is quite common now in Canada and elsewhere, spin off your own corporation, the skill sets to make that a success are different from the skill sets for discovery. Consequently, I think where the universities, to different degrees, really need enabling technology, enabling properties, is in terms of the ability to transfer to industry.

I was at a meeting in Edmonton just two weeks ago with a lot of young scientists, engineers, and medical researchers, very few of whom were really cognizant of the protocol for patenting. For example, they thought you couldn't publish a paper until you filed the final patent. You can make a patent this afternoon, file it, and publish tomorrow. It's the initial filing that's important.

So to the community, they think, well, I have to hold up publication, and that impacts my chances for tenure and promotion. Consequently, that impacts the process for commercialization, really.

The Chair: Thank you, Mr. Jaffer.

Mr. Nystrom.

M. Lorne Nystrom (Regina—Qu'Appelle, NDP): I wanted to ask the Retirement Income Coalition a couple of questions.

I suppose one thing we've made progress on over the last number of years in Canada is lowering the number of senior citizens living on the poverty line. Has that continued to increase, or has it decreased in the last 10 years? What is the trend, and how does it look for the future?

Mr. Malcolm Hamilton: First, as you undoubtedly know, Canada doesn't have an official poverty line; it has about five unofficial poverty lines.

If you take the more objective of those, what they say is that the poverty rate among senior citizens is significantly lower than the poverty rate among citizens of any other age.

What we have is a declining rate for seniors, and it is substantially lower than the rate you would find if you looked at working-age Canadians.

In regard to the current trend, I think it's pretty flat. It bounces up and down, but it really is quite a low rate by any international standard, or relative to other Canadian demographic groups.

• 1620

Mr. Lorne Nystrom: So the number of our seniors in poverty is low compared to other countries, you say?

Mr. Malcolm Hamilton: Compared to other countries and compared to other age groups in Canada.

Mr. Lorne Nystrom: How about compared to western European countries, the Scandinavian countries, Holland?

Mr. Malcolm Hamilton: I don't know. I just know that when the UN looks at it, senior poverty isn't a big issue. Now, the UN doesn't use the poverty line you're probably referring to, which is the low-income cut-off. That's not an international standard. No other country even has that line.

Mr. Lorne Nystrom: Thank you.

I'd like to ask Dr. Smith a couple of questions, if I may, and welcome you once again to our committee.

I want you to elaborate a bit more on what you think the spending priorities in the long term should be in terms of moving into other sources of renewable energy. We hear of fuel cells, hydrogen, and ethanol. There's a fair amount of research now going into ethanol in Saskatchewan, for example, and wind energy and the like. We've had a lot of people appearing before the committee in the last three or four weeks, Dr. Smith, advocating that we should be much more aggressive than we have been in the past in terms of looking for alternatives and concern about meeting the standards of the Kyoto agreement and what's happening to the environment and issues of pollution.

I wonder if you can elaborate a bit more in terms of what our goals and objectives should be in the context of the economic restraints we are now facing.

Dr. Stuart Smith: There's no question that a level playing field between existing sources of fossil-fuel-based energy and alternative sources of energy is not good enough. During a transition period during which the new technologies, the new fuels, establish themselves commercially, we have to have a tilted playing field in favour of the renewables. That's the first thing.

Now, to say which of the renewables, I don't believe anybody can guess right now where we're going to be 20 years from now. I believe we must move ahead on all fronts. If we're talking about electrical power, it's clear to me and to most of my colleagues that you have to have a requirement for whoever is carrying the current to the customer that a certain percentage of that current must come from renewables. If one leaves it just to the marketplace and gives people the opportunity to pay more in order to get renewable energy, many people will tell the pollsters they are fully intending to do that, but they never seem to reach for their wallet when the time comes. So it has to be a requirement on the power deliverer.

When you're talking about transportation, which obviously is the other big area—power generation and transportation are the two big areas of energy use apart from space heating, but we'll leave that for the moment—you have to improve the car, the vehicle, and you have to improve the fuel. Both can be done. I've seen arguments that improving the fuel is actually more cost-efficient than improving the car. But I think both have to be done. So we need to have fuel alcohols. So we need to have green fuels.

I think the oxygenated additives contained in the Clean Air Act in the United States did a great deal of good in producing.... Now, admittedly, it did produce a lot of corn-based ethanol, which is perhaps environmentally questionable and maybe is more of a grant or subsidy to farmers. But still, in all, it at least created the infrastructure whereby more cost-efficient ways of producing ethanol might eventually find their way into the marketplace. So alternative fuels are important.

Then, of course, there's the fuel cells. The fuel cell issue is far from settled, because we don't know ultimately what people are going to use in the fuel cell. It's fine to say that it'll be hydrogen, but where are they going to get the hydrogen? How are they going to get it? By what means? There's an awful lot we don't know.

Windmills for producing power—fine. But when it comes to transportation, the jury is still out as to what's ultimately going to win. But right now is not the time to back one horse and get off another. We have to back them all until we see how the race goes.

The Chair: Thank you.

Mr. Cullen.

Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Mr. Chair.

Thank you to the presenters. I have a few questions, but we won't be able to get to them all, I'm sure. I'll start with Mr. Eckert and Mr. Bradlow.

It seems to me that one of the things we need to be concerned about is making sure we have risk capital that is supporting growth through innovation, growth through whatever means. I was happy in Budget 2000 that the government brought up the tax-free rollover of capital gains. I think that's what you refer to in section 6, the broader rollover privileges? Is that the tax-free rollover provisions?

• 1625

Coincidentally, I was talking with Gordon Sharwood last night. He told me it was a welcome addition, but there were two kinds of tweakings that needed some attention.

One was the 60-day, or perhaps 90-day, rollover provision. He said it was just a little too fast. Secondly, he said there is some two-year domestic rule, one that I'm not aware of, that was forcing companies to.... I'm not sure. He was going to send me something over and I was going to feed it to the clerk.

I notice you don't mention those particular constraints. You talk about the need to broaden the investor base or the types of people who can invest. I wondered if you could expand on that, perhaps, and also talk about the two items Gordon brought up, if you're familiar with what he's referring to.

Mr. John Eckert: Yes, I believe we are. We know Gordon well. I know he is a very strong advocate for improving this particular measure.

We commend the government for having taken this step and introducing the rollover. It was a great move. It was modelled after the U.S. experience, which we studied. In fact, we played a fairly hands-on role in helping Finance Canada ultimately draft what did come out. But it does lack in a couple of practical ways. One issue in particular is that the legislation is structured such that if somebody invests, makes a gain, realizes on that gain, and wants to roll that over into a new investment, yes, that person can do it tax-effectively. But the 90-day provision—in other words, having to go back into a new investment within 90 days—is unrealistic.

To even do a deal in the private market it takes as a minimum closer to 120 days, I would say, not including the fact that you have to find a deal that you're happy with. That can take much longer.

There are many examples of legislation around when deals have to close and so on, which fundamentally results in bad deals being made. I think for any serious investor, you can't work within that limited timeframe. So we're looking to extend this so the period of time makes more sense. That would be, in our view, closer to a year.

The second issue surrounds the fact that it's available only to individuals. Yet there are many other taxable entities, whether it's family trusts or corporations, where they may well be individuals but they don't invest in their own name. Few people do today. If you have any wealth at all, you're likely to invest through some vehicle. As soon as you do that, you lose the benefit.

There should be some mechanism by which the true identity of the investor is recognized and provisions made for that investment to receive the same benefit. I mean, why not?

Mr. Roy Cullen: So the domestic rule, you're not familiar with that one. Gordon was going to fax me something on that. Frankly, I didn't quite get it over the phone.

Some kind of two-year rule for domestic—

Mr. John Eckert: Oh, I think that probably pertains to the ESOP recommendation. No?

Mr. Roy Cullen: It has to do with the tax-free rollover. But he'll send me over something on that.

Mr. John Bradlow: Perhaps I can just add to Mr. Eckert's comments.

The rollover privilege is at present available only to individuals, as was stated. But many individuals conducting their investment activities do that through corporations. In that capacity, they are not able to tap that resource.

Mr. Roy Cullen: Thank you.

I have a quick question, Mr. Chairman, for Dr. Smith and Mr. McGuinty.

I agree wholeheartedly on the brownfields. My riding, and many other ridings, have so many brownfields, pushing companies to greenfields, creating more urban sprawl. I did a study jointly with a U of T environmental student. We developed—I looked at Rexdale, my riding, as a case study—a series of recommendations. I think all the parties can play a.... Of course, if you can find the polluter, the polluter should pay, but that's not always possible. In the meantime, we need to find solutions.

I was intrigued with your comment about the aboriginal communities. We had some representations in Edmonton from a group from Nunavut, who talked about the particular need for investment and infrastructure. They said, out of the infrastructure program—because it's a per-capita-based allocation, and sometimes we shoot ourselves in the foot with per capita-based-allocations—they get $2 million. Up north, or anywhere, frankly, that doesn't go very far. They said they can't really go very far with anything until they have better infrastructure.

But I'd like to ask a specific question now that I've rambled on for too long.

• 1630

Ducks Unlimited were in here yesterday, and they presented what I thought was a very creative proposal to put in play at least the process to develop incentives to convert marginal farmlands to, I don't know, duck and bird habitat. The proper title is “conservation cover incentive program”. I believe they had worked with your group. It sounded to me like a good idea, but you're the pros, what do you think of it?

Dr. Stuart Smith: We think it's a good idea. We do work with them. We have a conservation of nature program; in fact, we're having a very large meeting in Manitoba next week on this very subject.

What's needed is more than just parks. We need buffer areas around parks. We need corridors between parks. And we need areas that are not parks, but where we can work together with private citizens, private landowners, to improve the environment and preserve species and habitat. We think the Ducks Unlimited proposal is an excellent proposal.

The Chair: Thank you.

Mr. Roy Cullen: Have I time for one more question?

The Chair: Ms. Barnes will have time for her questions.

Mrs. Sue Barnes (London West, Lib.): Thank you. I have one question.

I want to talk on the retirement issue. I used to be a self-employed lawyer. Every year, on the first day it was possible for me to contribute to my registered retired savings plan, I did—the very first year. Time and time again, people come here asking for increases in the limits. If they just made their contribution on the first of the year, the cumulative impact would be far greater than anything this fisc would be able to provide as an increase. I can't understand why that simple point doesn't get to all the self-employed professionals through all of their organizations. I know for a fact that very few do the maximum contributions. An infinitesimal amount do it on the first year of capability of doing their contribution.

Anybody who would like to comment on that point, please say something.

Mr. Malcolm Hamilton: I don't know how you work this out. The difference between contributing the first of the year, the middle of the year, or monthly during the year, with interest rates at today's levels and stock market returns at today's expectations, is probably 4% or 5%.

Mrs. Sue Barnes: This has been going on for years. Back then interest rates were in the teens, so I understand today, but we're not just talking today.

Mr. Malcolm Hamilton: Well, today it's basically half the interest rate. If the interest rate is 12%, it's a 6% difference. If the interest rate is 6%, it's a 3% difference. So it's the difference between a cap of $13,500 and maybe $14,000.

Is it, for people who are constrained, the smart thing to do? Yes, it's the smart thing to do. Will it enable a $100,000-a-year person to get to the kind of income that a federal civil servant can get to? No, it won't.

Mrs. Sue Barnes: I would point out to you that it's the cumulative effect over a lifetime of contributions from when you first enter into your profession.

Mr. Malcolm Hamilton: I don't want to bore people with the arithmetic, but it'll be 4%.

Mrs. Sue Barnes: Mr. Pasternak.

The Chair: Your time is up.

Mrs. Sue Barnes: I know; the time is up for both of us.

Mr. Roy Cullen: I'd like to make one comment. I wasn't going to bring it up, because I don't want to get into a debate about MPs' pensions here. Well, I'm quite happy to, but I don't think it's....

At any rate, I saw this $98,000, and I can tell you something. I wrote to the House of Commons a few years ago and asked them to put in writing what my pension would be if I was in the House of Commons for ten years. This was in 1997. Admittedly, our pay has gone up, and it would be slightly more, but I have it in writing—I was getting hammered by folks like that—that my pension after ten years in the House of Commons would be $22,000. Our pay just went up, so it'll be a little more than that.

These figures for MPs' pensions get bandied around, and I don't know where you're getting them. I hope you're comparing apples with apples here, but it certainly doesn't relate to anything I have in writing from the House of Commons in terms of a pension.

The Chair: I think you just have to get into cabinet.

Voices: Oh, oh!

Mr. Roy Cullen: Don't we all.

The Chair: Dr. Bennett.

Ms. Carolyn Bennett (St. Paul's, Lib.): I have two quick questions, Mr. Chair.

To the ETIC people, it seems like such an important thing; what happens if it doesn't happen?

Mr. Al McDowell: If it doesn't happen, I think ETIC, as an organization, will wither and die very quickly. The companies themselves will continue to fund research on an individual basis. You typically will find that, for example, the potash companies are all in the Saskatoon area, so they'll fund projects at the University of Saskatchewan, which is a great university. But they will tend to do only that, and stay in the earth sciences. They won't have the same interaction with other companies and with other universities.

• 1635

Mr. Jack Pasternak: Conversely, the Alberta companies will fund the University of Alberta in Calgary, and they will be doing almost duplicate research. We offer the opportunity to really bring the whole thing together.

Ms. Carolyn Bennett: Thank you.

To the round table, in your fourth point, building capacity for fiscal reform, in this time of post-September 11, where there's going to be some fiscal restraint, there are some revenue-neutral things I think we could be doing in terms of changing the perverse incentives for bad behaviour to incentives for good behaviour and other specific things that the round table has worked on. I know a lot of people feel that the tax on dirty gas should be higher than the tax on clean gas so that clean gas is cheaper at the pump than dirty gas.

Are there other such things you could think of that we could put into the mix that actually would be revenue-neutral?

Dr. Stuart Smith: The answer, Dr. Bennett, is yes—but not today. We have a project going on about ecological fiscal reform and we have the cooperation of people from all the usual walks of life who we bring together. We have people from industry, from government, and from finance who are playing a role with us, and we have the environmentalists, the economists, and so on.

First of all, related to conservation we are looking at ways in which ecological fiscal reform could encourage the kind of thing we were just asked about with respect to Ducks Unlimited. We're looking at cleaner fuel and cleaner engines, and whether we can use the tax system to bring that about. We have another project that involves substances identified as toxic under CEPA and whether there's some way we can use the tax system to phase those out more quickly.

Jean Bélanger, who is sitting in the back here, is actually the chair of that group. I'm sure he could talk with you privately later, if you like.

But, yes, the main concern we have is we want to be sure that the Ministry of Finance has the capacity to do the analysis required. We'll come up with the best analysis we can do, we'll make recommendations of revenue-neutral matters, just as you recommend, but at that point the ability to respond in the finance department is important. So we're encouraging the department to put whatever resources they can afford into building capacity to model and to analyse these kinds of recommendations, which we think is the direction we should be going in.

Ms. Carolyn Bennett: Thank you.

The Chair: Mr. Brison.

Mr. Scott Brison (Kings—Hants, PC/DR): I want to thank each of the witnesses today for their interventions, which have been very valuable to us.

My first question is to the Retirement Income Coalition, on the foreign content limit. I didn't hear you address foreign content limit in your address. I would appreciate your feedback on that briefly, please.

Mr. Charlie Pielsticker: First of all, we'd like to acknowledge and credit the government for having increased the foreign content limit from the 20% to eventually the 30% level. I think that has gone a long way in moving this and I think the government should be credited for doing it. That is a position the coalition has gone along with and did recommend last time we were here.

Mr. Scott Brison: My next question is on capital gains taxes. We didn't have a personal capital gains tax in Canada prior to 1972, and I would appreciate the Retirement Income Coalition's perspective on what it would do to eliminate the personal capital gains tax, not just reduce it but actually eliminate capital gains tax, as Germany is doing in 2002.

From the perspective of the venture capital industry, I'd appreciate your feedback in terms of the impact on unlocking capital in Canada. One of the points your other organization, John, the e-business round table, has made is that small, incremental changes will go unnoticed by U.S. capital markets, but more significant changes potentially would be noticed.

I would posit that eliminating the personal capital gains tax in Canada would be more than an incremental change.

• 1640

Mr. Malcolm Hamilton: We're not opposed to elimination of capital gains tax. It would go some way to alleviating the problem that people with good incomes have in saving tax effectively for retirement. It's not our preferred solution, for a couple of reasons. One, it will still leave us with a large pension problem, because it fixes it up if you're in a savings plan, but the question is, what's the corresponding pension change you could make to eliminating capital gains tax? It's not easy to make a level playing field when you go that route.

The second issue we see there is that, for many people, it'll make it complicated to figure out whether they should be saving inside or outside RRSPs, because it would give them two very good routes.

The third issue, which we keep coming back to, is that somebody had better look to government revenue projections when the baby boom retires. Seniors in Canada pay about one quarter of the taxes of working-age people. That's unlikely to change in 20 to 30 years. So the more we build the system around tax-exempt as opposed to tax-deferred income, the more we're going to paint ourselves into a corner. If an elderly population has done its saving and has accumulated capital, and the income that capital generates, either from capital gains or otherwise, is exempt, then who's going to pay all the taxes? You're going to have that shrinking working population carrying more and more of the burden.

The last thing I think is important, and it's very obvious today, is that if you tell people capital gains are tax-exempt, but interest is fully taxable, and then you're a senior citizen with $100,000 of capital, what you're really doing is giving them a huge incentive to get in the stock market. And when the stock market behaves the way it did in the last year, seniors quickly figure out that there's a problem being elderly and having all your money in the stock market.

Mr. Scott Brison: Well, capital gains this year is a bit of a moot point—

Mr. Malcolm Hamilton: Yes.

Mr. Scott Brison: —as is significant interest income. But that's another story.

John.

Mr. John Eckert: Although we have not included in our set of recommendations the elimination of capital gains tax, it's fair to say that we would support it. We feel it would have a dramatic, positive impact on Canada in a number of respects. First, it would go a long way to providing the kind of incentive for entrepreneurship this country needs, given that we are in a very fierce battle for both talent and capital vis-à-vis the U.S.

Second, it would unlock a lot of pregnant capital, which is capital that is now tied up and is not being turned over. One thing that is important to understand is that the velocity of money is everything. It's how quickly money turns over, and with capital gains tax, an inclusionary rate of even 50%, there is a lot of money that does not turn over very often. Those who are holding these appreciated assets don't want to have to pay the tax, so they'd rather keep it in a fairly passive investment, collect dividends, or whatever other returns might come, but not look to deploy that money productively elsewhere.

Perhaps most importantly, we think a reduction in capital gains tax would very strongly send a message to the world that Canada is open for business. What I would look forward to very much is to wake up and see on the cover of The Economist a headline that says “Canada is, once and for all, competitive with the rest of the world”. Because today we're not.

Despite what we may think here, if you actually sit down and have a few drinks with investors in Asia or the U.S., at first they're all very flattering about Canada, but when push comes to shove, are they going to build a chip plant here? Not likely, because they still don't see Canada as all that friendly an environment for business and growth. And these aren't messages that will be conveyed lightly, but in fact are true.

The Chair: Thank you.

Mr. Kenney.

• 1645

Mr. Jason Kenney (Calgary Southeast, Canadian Alliance): Thank you, Mr. Chairman.

Mr. Hamilton, did you write an op-ed for one of the papers, or did you used to?

Mr. Malcolm Hamilton: Not regularly.

Mr. Jason Kenney: You're often quoted on pension issues, and you certainly have a very broad, diverse coalition there. I infer that your submission is very limited in its scope in part because of the breadth of your coalition, everything from CALU to CARP. It includes people with different interests.

Maybe you already answered this question in response to the question on capital gains, but a number of witnesses have encouraged us to consider the notion of a tax-prepaid savings program. As you know, a number of papers have been published on this. I would say that a pretty significant majority of witnesses here addressing retirement income issues have been in favour of the TPSP. Am I to take it that you're not because you're concerned about the lack of a tax stream at the other end?

Mr. Malcolm Hamilton: It's not that we're not in favour of it. Our preferred solution is for taking the limits up, but it's not our preferred solution for low-income Canadians. If you're familiar with the TPSP proposal, there are really two quite different elements to it. One is, can we do something so low-income Canadians who save don't find that the only thing they've accomplished is cutting their government benefits? I think we would probably be supportive of TPSPs for that purpose.

But when you get to TPSPs as a solution to the tax limits, it's a good idea, and if someone told us there's no way the tax limits are ever going to change, I suspect we would support TPSPs. But the fact is, it leaves the pension system with a lot of problems. If you're in the teachers' pension plan or if you're in the hospitals' pension plan, how do you deal with the pensions of people whose earnings are over the limit? It's not easy to change pensions into TPSPs. The problem would go away if we had higher limits. We're not saying it's a bad idea; it's just not our preferred solution.

Mr. Jason Kenney: I just have one question, Mr. Chairman, for Mr. Bradlow.

You presented in your paper a number of different technical tax changes that are needed to create a better environment for venture capital. Would you be able to identify one in particular, or of all the issues of concern to venture capitalists, which one would you identify? What would be the single most effective policy change we could make?

Mr. John Bradlow: Mr. Kenney, it would be point two, where, if the current regime were remedied, it would allow American pension funds to invest in Canadian venture capital investment opportunities. It's as simple as that.

At the moment—in an example we refer to in our submission—a certain country whose economy is small relative to Canada's, namely Israel, draws more venture capital funds from United States investing institutions than Canada does. The reason for that, we believe, is found in the technical barriers we identify in our submission.

Mr. Jason Kenney: Thank you.

The Chair: Thank you, Mr. Kenney.

On behalf of the committee, I would like to thank you for the input you've given us. For the record, I want to tell you that as a committee we have faced a bit of a challenge this year since the tragic events of September 11. As we travelled, we found that there was very strong support for a national security package. I must say, that was the dominant theme regardless of which part of the country we were in and regardless of which individuals were actually appearing in front of us.

There were also three issues that came out loud and clear. Canadians don't want us to return to a deficit position. They also want us to honour the commitment we made in October 2000 as to federal transfers to the provinces for health care and education, and then there is the $100 billion tax cut.

We have to make some trade-offs as we prepare to write the report. We do that in what I consider to be an era where the only thing that's really certain is uncertainty. The economic indicators in reports coming out of the United States aren't very positive. For the past 12 months we have also seen economists and commentators here in Canada revise their projections. You can appreciate the uncertain environment we're operating within.

• 1650

That said, I will say that this committee will remain true to its core values in that we are in fact very much a pro-growth committee. We'd like to address some of the challenges our country faces, whether they are from the environment or in attracting investment, and we'll remain true to those values. I do want to tell the members of the panel that these are uncertain times, and we have to factor that into our decision-making.

Once again, thank you very much.

Let's suspend discussion for five minutes.

• 1650




• 1700

The Chair: I'd like to welcome everyone here this afternoon. I was given a special order that I'm supposed to follow here, so I'll just do as I'm told. This is what I have, and tell me if this is correct: the Canadian National Institute for the Blind, the Coalition of National Voluntary Organizations, the Health Charities Council of Canada, the Canadian Cancer Society, the Heart and Stroke Foundation of Canada, and the Council for Health Research in Canada. And within that sphere there is also an order, which I will not go into.

Am I correct? Is this the order in which you want to appear? Great.

So we'll go first to the Canadian National Institute for the Blind. I have the pleasure to introduce Vangelis Nikias, National Director, Government Relations and International Liaison; and Linda Manyguns, National Coordinator, Aboriginal and Inuit Services. Welcome.

Mr. Vangelis Nikias (National Director, Government Relations and International Liaison, Canadian National Institute for the Blind): Thank you, Mr. Chairman. It's a pleasure and an honour for us to be able to appear before the committee once again, and, especially under the circumstances, to exercise our democratic right to speak to the committee about the concerns and needs of blind and visually impaired Canadians. We submitted a brief in writing last August, and we have copies of it here. I know time is limited this afternoon, so I will be very brief.

I want to address four issues and then turn the microphone over to my colleague, Linda Manyguns, our national coordinator on aboriginal issues, who is appearing before the committee for the first time.

In our brief we have made reference to the deficit in terms of research funding for vision loss in Canada. Our population ages, and as a result more and more people lose their vision. Unfortunately, the amount we spend in Canada for vision-loss research is limited, and in comparison with the United States, it's really insignificant. I think this year we spent about $14 million. In the United States, in Canadian dollars, they spent over $700 million. We suggest that we should spend at least 10% of what the Americans spend in research.

We want to congratulate the government, though, because the government has taken some initiatives by setting up the Canadian Institutes of Health Research, which holds the promise of increasing our activity in this area.

We also want to congratulate the Government of Canada for the announcement made recently by the Minister of Finance with respect to a tax measure that provides assistance by way of donations of publicly traded securities to charities. We think, as the government has indicated, this initiative is a sound one. It does help charities raise funds, and the minister's announcement is a very useful one. Again, we congratulate the Government of Canada.

• 1705

The third issue I want to address has to do with the library and information needs of print-disabled Canadians. Over three million print-disabled Canadians at this point have inadequate access to all kinds of information. In our knowledge-driven society, this type of information is essential if we are going to participate fully in society.

The CNIB and the National Library of Canada took an initiative, and as a result of that, we have set up an access council that advises the national librarian. The access council has put forward a number of suggestions to government, including the allocation of $7 million, which will enable us to increase considerably the amount of alternate-format materials available to print-disabled Canadians.

I would urge you to look at this recommendation carefully. I believe it's an affordable recommendation. If implemented, it will make a great deal of difference in the type of service print-disabled Canadians receive.

My final point has to do with an issue I have raised with you before, and I think I will keep raising it until we address it, because it is a matter of justice, a matter of adequate services, and a matter of national cohesion. It has to do with the fact that unfortunately in Canada we do not have a cohesive system of providing technical aids and assistive devices to disabled Canadians. Depending on where one may live in the country, what province, and what age group one belongs to, there are inconsistencies and inequities, and needs go unmet.

We have provided details in our brief, and we have also brought a copy of a report we have prepared called Toward Implementing in Unison, which provides detailed information about the inequity in programs we have in the country at this point. At some point it's imperative that the federal government provide the necessary leadership to address this issue and meet the needs of disabled Canadians.

Linda.

Ms. Linda Manyguns (National Coordinator, Aboriginal and Inuit Services, Canadian National Institute for the Blind): Thank you.

I've been asked to come and talk about the aboriginal services issue. I've been hired to coordinate national programming for aboriginal people who are blind and visually impaired in our communities. In doing so, we have begun a number of projects, some in the Quebec area, some in the Maritimes, northern Ontario, Winnipeg, southern Alberta, and northern B.C.

One of the universal problems in beginning these discussions is the fact that when we get to the table, prior to having a proposal drafted and knowing what we need and how we're going to work together, there are no funds available in order to begin that dialogue. It makes it quite difficult. I've been involved with a number of projects now, and the discussions that could take a couple of months to organize, and to develop a strategy around with regard to the facilities and infrastructure that might be unique to a community, take months and months. It took up to a year, in one case, just to get initial discussions begun.

We need to get those discussions done in order to know what can be developed in partnership with the communities. We are quite hampered by not having access to any funds to be able to do that. Instead, we're finding that most people are stretched with their own list of duties, including a number of our staff. As a result, everything is squeezed in, or what have you, in their timeframes.

As well, there's considerable emphasis put on development and taking ownership of responsibilities within the aboriginal communities. There is interest in partnerships with organizations such as the CNIB to develop those. We really do need to have access to some funds so that we can sit down and honestly engage in those discussions, with the end goal of drafting some good and sustainable projects.

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The Chair: Thank you, Ms. Manyguns and Mr. Nikias.

We'll now hear from the Coalition of National Voluntary Organizations, Mr. Hatton. Welcome.

Mr. Al Hatton (Executive Director, Coalition of National Voluntary Organizations): Thank you very much.

Like Vangelis, I would like to thank the committee for having us again. This is about the fifth year I've come before the standing committee. I thought the last three or four were pretty challenging. You keep thinking things are actually going to improve and it's going to get easier, and some of our issues can be addressed in a more holistic way, but the last three or four times it has been a tug-of-war between the economic and the social, in broad terms. Now we have a new player, a third tug, in terms of security and the after-effects of September 11. In a sense, that has put huge pressures on the voluntary sector, and I'm going to speak very broadly about the voluntary sector in Canada.

One of the challenges we face is that at the same time as we've been living with the effects of program review over the last four or five years, downsizing by provinces...and in a sense, the hope was that through the social union framework agreement and some of the arrangements between the provinces and the federal government, policies and a role for the voluntary sector would be clear. In fact, we've had tremendous success working with the federal government. Where we haven't been as successful is working with both sets of government on a longer-term strategy for social development, again in a very broad way.

We were very excited by the themes from the Speech from the Throne, which focused on social inclusion, the skills agenda, innovation, aboriginal people, poverty, R and D, and housing. These were the themes that, in the voluntary sector broadly, we've been trying to work with the federal government to have a long-term strategic plan around.

Unfortunately, we're afraid the events of September 11 have, in some senses, marginalized that. That's important. It's obvious we have to respond to the after-effects of September 11. On the other hand, the pressures on communities are even more dramatic. Organizations that previously were living with all the changes—we've gone through our downsizing—have looked at what our results are and at the ways in which we're using resources.

It's always fascinating when I listen to the private sector talk about how entrepreneurial they are. If they had any idea, if they went and worked in local organizations, what we do with limited dollars, they'd realize it's quite extraordinary. And yet that doesn't reach public profile.

So for us, knowing the pressures on the Standing Committee on Finance, it would be important to put some markers in your report about the importance of continuing to invest in organizations like CNIB—and the rest who are around this table—because in fact the infrastructure in communities and in organizations is going to be the secret ingredient that actually pulls us through this next period of what's ahead.

That said, we have established a very exciting partnership with the federal government, and it has been very low key. With investments from the federal government just after the 2000 budget, we've been able to set up a very complicated and exciting process of working jointly with the federal government in a whole series of areas, including research and capacity building. Where we're having some difficulty is around a long-term funding regime. I want to talk about that in a couple of minutes.

At the same time, we've been working with health charities to bring them together to set up their common agendas. We're doing the same thing with children's organizations and youth organizations, and the effects of that you'll be hearing probably in the next couple of years.

We've also been working closely with HRDC, because, in the after-effect of the “Gs and Cs”—the audit debacle, I suppose—it's obvious that servicing and modernizing the rules at HRDC has to go a lot further. We have all the terms and conditions down for how to write a proposal, and all the checklists, but we haven't gotten very far along, both in the sector and with HRDC, in terms of how to measure impacts and real outcomes in a way in which the government, the voluntary sector, and other funders are satisfied.

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We've also been working with Treasury Board on a whole new financing scheme for voluntary sector organizations in the years ahead. There's no mention of money, but at least we're looking at some of the rules, regulations, and structures across departments so we can have some more transparency and clarity.

We're also working in the area of a new social policy development framework. Three organizations, NVO, the Canadian Council on Social Development, and the United Way/Centraide Canada, are working with a number of other partners at what in a simple way is a new social vision for Canada.

Both as a country and as many organizations, we have felt in some sense that we've had to make a number of compromises to get our economic house in order. In a sense, the social side of the equation has slipped down in importance. We want to escalate it back up. It's a tough time to do it, but when we resurface from all the challenges the after-effects of September 11 are forcing us to respond to, the timing will be right for communities, governments, and the private sector to again look at what are the underpinnings and the values that are going to sustain Canada in the years ahead.

I have two very large recommendations and then one supportive recommendation to my colleagues here and others in the voluntary sector. With all the progress we've been making, the clear thing that's come forward is the social infrastructure. The first recommendation, then, is to strengthen the infrastructure of both organizations and communities.

We've talked a lot about creating an environment for the private sector to flourish and go global. We have increasing pressure from the public for this sort of capital infrastructure in municipalities to be strengthened. What we haven't talked about is the social infrastructure that sustains organizations, which then can utilize the 6.5 million volunteers who give of their time in this country. So we're proposing a fund over the next five years of $100 million a year that will go towards policy development, research, innovation, and program delivery across this country for the years ahead.

Whatever resources are put towards the learning and skills agenda that the committee would be recommending, and the Department of Finance would be bringing forward in the next budget, our second recommendation is that at least 50% of those resources be devoted to organizations and communities as opposed to simply business. This would be very important to ensure that those marginalized and vulnerable populations stay abreast of the exciting changes going on in terms of development, both globally and in Canada.

A third general recommendation is that we also support the work of the Health Charities Council of Canada, other groups around this table, the National Children's Alliance, and a number of the networks we work in.

Thank you very much for your attention.

The Chair: Thank you very much, Mr. Hatton.

We will now hear from the Health Charities Council of Canada, Yves Savoie. Welcome.

[Translation]

Mr. Yves Savoie (The Health Charities Council of Canada): Thank you, Mr. Chairman.

I thank you for the opportunity to speak to the Committee. I am the Executive Director of the Canadian Muscular Dystrophy Association but I speak to you today as a volunteer on behalf of the Health Charities Council of Canada.

The Council, created in 2000, allows its 45 members to speak with a strong voice on their common concerns. Our members represent smaller national charity organizations such as the Canadian Marfan Association, middle-sized organizations such as ours, the Osteoporosis Society of Canada and the Thalidomide Victims Association of Canada, as well as larger organizations such as the YMCA, the Canadian Diabetes Association and some of the other organizations you see around this table today.

Those national voluntary organizations play various roles in the health sector. Among those, they provide annual funding for research of about $300 million, they promote healthy living, they provide services and they implement community programs across the country; they distribute health information to the Canadian population and to our health professionals; they provide help and care to people with chronic diseases or serious handicaps, as well as to their families and their helpers.

In other words, our Council speaks for hundreds of thousands of volunteers and for millions of Canadians who benefit from the services of our organizations.

[English]

The council was formed around four common priorities: health research; community and patient support; disease prevention and health promotion; and finally, health information and surveillance. The latter ensures that information is available to track the health status of Canadians and the performance of our health care system, information needed to make sound program and policy decisions.

The national health charities belonging to the council are committed to improving the health of Canadians, a goal that we share with you personally and with the Government of Canada.

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As Al has just noted in his own remarks, even though the attention of Canadians has recently shifted to issues relating to security and to the eradication of terrorism, health continues to be of major concern. The importance of maintaining and improving health cannot be underestimated. It is a long-term job that cannot simply be placed aside today and picked up tomorrow or some years from now. It must always be attended to. The overall health of the population, which is in part affected by our ability to cope and to make sense of the world around us, must continue to be a priority for us, as it is for many Canadians. Our recommendations to this end follow.

We recommend increasing funding to Health Canada by an additional $300 million annually. In this context I note that recent federal investments in health through the CHST and various targeted programs have not increased Health Canada's internal capacity to provide federal leadership in key portfolios, such as health promotion, or in areas related to access to drugs and devices, to name but a few.

As part of this investment in Health Canada, the council is calling for the creation of a $5 million capacity-building fund to enable small and medium-sized charities to better respond to the needs of Canadians. Multi-year funding that supports long-term planning, organizational growth, and policy capacity development is critical to these organizations.

I draw your attention here to the fact that all of our members, including the largest charities—some of whom you'll meet later around this table—support this recommendation. The large charities recognize that while they themselves do not rely on capacity funding, a strong sector is only viable if it can depend upon strong individual members.

We also have two recommendations related to disability: first, revise the definition of “disability” to allow individuals with substantial physical or mental impairment that is continuous, or recurrent, and expected to last one year or more, to qualify for the disability tax credit; and second, add a category of disability to provide some tax relief to Canadians who face increased costs because they live with chronic conditions.

We believe in the principle of equal opportunity to succeed. The definition of disability currently screens out many who are disabled—those who suffer from recurrent impairment, and those who live with a chronic disease. It is crucial that this definition be revised and broadened, given the expected increase in the ranks of those with such long-term conditions.

[Translation]

Finally, the work of our volunteer health organizations is generously helped by funding from Canadians. We recommend that the government improve the tax benefits provided to donors who give in aggregate less than $2,500 per year. The representatives of the Canadian National Institute for the Blind have noted the measures that the Minister of Finance made permanent at the beginning of the month, but those steps apply to smaller donors who represent the vast majority of people making gifts to health charity organizations.

In conclusion, we thank you for the work you have done in the past to improve the health of Canadians and we urge you to keep your continued commitment towards health. We thank you for having given us the opportunity to speak to you tonight.

The Chair: Thank you, Mr. Savoie.

[English]

We'll now go on to the Canadian Cancer Society. To Mr. Kenneth Kyle, director of public issues, welcome.

Mr. Kenneth Kyle (Director of Public Issues, Canadian Cancer Society): Thank you, Mr. Chairman.

Your committee wanted to hear suggestions on how we could create a socio-economic environment that would help Canadians enjoy the best quality of life and standard of living. I'm sure this committee is concerned about rising health care costs. I think all Canadians are, and I have here today a big part of the answer to this question.

I'm leaving with the committee a report that shows the evidence linking increased tobacco prices—primarily through tobacco taxes—with reduced smoking. Controlling the tobacco epidemic is the fastest way to promote health and to reduce future health care costs.

I want to thank this committee for your support last year, for your recommendations, and I think all parties in Parliament now get it with regard to the importance of increasing tobacco taxes.

It's been an exciting day today. We're certainly thrilled that the Minister of Finance, Paul Martin, and the Minister of Health, Allan Rock, announced, just a few minutes ago, increases in tobacco taxes—in Quebec, for example, an increase of $4.50, not including GST and PST, and in Ontario, an increase of $3.20.

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However, there is still a misunderstanding. People think prices are still higher here in Canada than they are in the U.S., as when we had the smuggling problem back in 1994; but it's just the reverse today. We have a long way to go. Ontario and Quebec still have the lowest tobacco prices in North America, lower than the tobacco-producing states in the U.S.

If you have questions, we can answer them. I have the editor of this report here today to answer technical questions. More can be done, but we want to thank everyone, and especially this committee, for your past support.

Some of my colleagues will be talking about funding for the Canadian Institutes of Health Research. In the interests of time and to give committee members time for questions, all I will say is that we certainly support what you will hear from my colleagues.

We recommend that the CIHR budget be increased by at least $150 million in 2002 and that greater efforts be made to integrate the federal government health research agenda. CIHR was a first step. There's the Canadian Foundation for Innovation, CIHR, Genome Canada, and the Canada research chairs. And there is certainly room for better integration.

Last I want to talk about your request for suggestions on providing Canadians with equal opportunity to succeed. We all know the Canadian population is aging. The impact of cancer on individuals and families, and the impact on our health care costs, is increasing at an unacceptable rate. Cancer is responsible for almost one-third of potential years of life lost. Progress is being made against cancer, but cancer rates are growing quickly in comparison to other major diseases.

As we explained to you last year, to minimize the inevitable negative economic impacts on health and health care in response to these important demographic changes, the Canadian Cancer Society has joined with the National Cancer Institute of Canada, Health Canada, and the Canadian Association of Provincial Cancer Agencies to lead stakeholders from across Canada and all jurisdictions in the development of a Canadian cancer control strategy. Health Canada's leadership will be vital to ensure the continued collaboration amongst all parties.

Finally, we would like to see, through the Canadian strategy for cancer control, the establishment of a national comprehensive strategy for human resources; a national, provincial, territorial, and municipal primary prevention system to address population-based risk factors for cancer and other chronic diseases, and to reduce health care costs in the long run; an interprovincial mechanism to develop evidence-based national standards and guidelines; standards for universal and equitable access to high-quality psychosocial, supportive, rehabilitative, and palliative care; and finally, definitions of research priorities and the creation of a plan for a strategic investment in priority areas.

We believe there should be increased funding of $300 million a year for the next five years given to Health Canada for the Canadian strategy for cancer control.

As a final comment, we have many interdependent systems that collect and store cancer data. The unfortunate result is that cancer information is not available in an integrated format. The Canadian Coalition on Cancer Surveillance was therefore created to lead the development of an integrated national cancer surveillance system to provide reliable and relevant information; to standardize assessment of the effectiveness and efficiency of cancer control systems all across Canada; and to support the creation of needs and priorities for evidence-based programs that have the potential to reduce the incidence and mortality of cancer in Canada.

The actual budget for this is less than one-tenth of the amount required, so we are hoping you will recommend adequate funding for the Canadian Coalition on Cancer Surveillance as part of this.

Thank you very much.

The Chair: Thank you very much, Mr. Kyle.

We'll now hear from the Heart and Stroke Foundation of Canada, Carolyn Brooks, president-elect, and Sally Brown, executive director and CEO. Welcome.

[Translation]

Ms. Carolyn Brooks (President Elect, Heart and Stroke Foundation of du Canada): Thank you, Mr. Chairman. My name is Carolyn Brooks and I am the President of the Heart and Stroke Foundation of Canada. With me is Ms. Sally Brown.

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The mission of the Heart and Stroke Foundation of Canada is to improve the health of Canadians.

[English]

The mission of the Heart and Stroke Foundation of Canada is to improve the health of Canadians by preventing and reducing disability and death from heart disease and stroke through research, health promotion, and advocacy.

We appreciate the opportunity to appear before this committee, and are very pleased to participate in this round table discussion with our colleagues, with whom we work closely on a number of issues.

In our written brief, we commend the federal government for the reinvestment in health over the past several years, including the increase in the annual health care transfers to the provinces and territories and the investments in the Canadian Institutes of Health Research. Our brief speaks to the need for balanced investment, specifically in health research, health promotion, and surveillance.

All of us here recognize that the context in which we appear before you today is much different from what we would have imagined two months ago. We understand and support the need for the federal government to reassess its spending priorities following the tragic events of September 11.

That said, we also believe these events must not derail the government's fundamental and long-term commitment to improve the health of Canadians. Canadians, through public opinion polling and other avenues, have consistently told us they want the government to accord health care a high priority, and there's no evidence to suggest that has changed today.

We must reduce the burden of cardiovascular disease. This is crucial when we examine the terrible toll cardiovascular disease inflicts upon Canadians. Heart disease and stroke represent the leading cause of death in Canada, killing almost 80,000 Canadians annually. We estimate that for the most recent year in which data was available, cardiovascular disease was responsible for almost $20 billion in direct and indirect health care costs.

If we're going to combat this deadly disease, we will need a coordinated and balanced national approach—a cardiovascular action plan, as we call it. This plan is founded upon four cornerstones. The first is health research, one of the Heart and Stroke Foundation's core competencies. We agree with all our colleagues here on the importance of maintaining the government's commitment to the CIHR.

The second cornerstone is health promotion and disease prevention. We know the risk of heart disease and stroke can be reduced significantly if we eat properly, exercise, avoid tobacco use, and manage our stress. We support the tobacco control measures proposed by the Canadian Cancer Society. In terms of stress, recent media coverage indicates that the events of September 11 have led to an increase in the utilization of our health care system as a result of stress-related maladies. This reminds us of the importance of these risk factors, and speaks clearly to the need to continue to research, understand, and alleviate these risk factors.

The third cornerstone of the Canadian cardiovascular action plan involves the tracking and monitoring of the status of the health of Canadians and their health care system. There are significant gaps in our ability to track heart disease and stroke information, particularly with respect to the outcomes of interventions. The ability to assess outcomes is critical to providing evidence-based care and establishing sound health policy. We urge the government to provide ongoing, substantial support to the Canadian heart and stroke surveillance system.

The fourth and final cornerstone is health services delivery. The strength and integrity of the health care delivery system is crucial in the maintenance of cardiovascular health. This entails maintaining adequate and renewable human resources in cardiovascular health, ensuring access to cardiovascular care, ensuring continuity of cardiovascular care from the hospital to the community, and evaluating cardiovascular outcomes.

The reality is that Canada is without a unified and coherent national strategy to address such common debilitating conditions as heart disease and stroke. We need such a strategy developed and implemented in cooperation with the voluntary, health professional, and government sectors. We request that the government support the implementation of a cardiovascular action plan and ensure the necessary funding to facilitate this process.

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In summary, the Heart and Stroke Foundation of Canada has received substantial support and trust from the Canadian public over the years for its high calibre of research and its health promotion programs. The Heart and Stroke Foundation of Canada is well positioned to work within a collaborative process to renew our nation's cardiovascular health.

[Translation]

I want to thank you for the invitation to speak to you tonight.

[English]

The Chair: Thank you very much.

We will now hear from the Coalition for Biomedical and Health Research, Dr. Barry McLennan and Lisa McKerracher. Welcome.

Dr. Barry D. McLennan (Chair, Coalition for Biomedical and Health Research): Thank you, Mr. Chairman and members of the committee.

We thank you for the opportunity to appear before you today and to participate in these pre-budget consultations. I believe copies of our brief have been distributed to committee members.

Accompanying me today is Dr. Lisa McKerracher from the University of Montreal. Lisa is a neuroscientist and does spinal cord research. I'm going to ask her to make a few remarks in a few minutes.

The federal government's innovation agenda is now a matter of record. In the throne speech earlier this year, the government committed unequivocally to double its own research spending by 2010 and to take measures to ensure that Canada is among the top five investors in research in the world. I don't think anyone in Canada would argue with that objective. It's very noble and laudable.

As others at the table tonight have mentioned, the government has made significant investments in research through CFI, the research chairs, the Genome Canada initiative, and so on. I want to thank this committee and the Government of Canada for taking these initiatives. You're to be commended for this work and thanked by all Canadians for this. These initiatives have contributed to a renewed sense of purpose and hope in the scientific community, perhaps nowhere more than in the biomedical, clinical, and health research area. The promise and the hope generated by the establishment of CIHR was adopted wholeheartedly by the entire health research community.

I can say that with some knowledge, because I was on the interim governing council that laid the groundwork for CIHR. At another time I will tell you about some of the dialogue we had in getting all the colleagues lined up and marching to the same music. It was a tremendous achievement.

The CIHR was launched only 17 months ago, on June 8, 2000. Very simply, the objective of CIHR is to excel, according to internationally accepted standards of scientific excellence, in the creation of new knowledge and its translation into improved health for Canadians. You've heard that theme mentioned by some of our other speakers tonight.

There's no doubt that with appropriate ongoing support, the health research community will make a vital contribution to the goal of creating a culture of innovation in Canada. As you've heard today, however, there's growing anxiety within the health research community that the government's resolve is unclear.

Three factors, I submit, have combined to give us this sense of unease: first, of course, the tragic events of September 11; second, the general state of the global economy; and third, and most importantly, the lack of any public announcement regarding the government's budget plans for CIHR in this year.

Clearly things have changed, but as others have said tonight, we must not be derailed or side-tracked. Like David Strangway, the CEO of the Canada Foundation for Innovation, and like the Conference Board of Canada, CBHR urges you to advise the government to continue to invest in innovation, stay the course, and serve as a beacon of hope in this period of doubt and uncertainty.

The creation of CIHR, you will remember, was touted by government as a prime example of its commitment to innovation. However, despite many verbal assurances about forthcoming commitments, there has been no formal funding announcement for CIHR for the third and subsequent year of its operation. As Dr. Alan Bernstein, the president of CIHR, has said, their mandate is huge and their budget is not.

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CIHR has been handed—I don't think deliberately—a severe cashflow problem that must be rectified in the December 2001 budget. If their cashflow problem is not addressed in the next budget, the result will be catastrophic for CIHR.

Let me simply remind you that in the September competition there was a 28% increase in the number of applications to that agency. Now, that's a testament to the fantastic expectations that have been raised among health researchers in Canada for the objectives and the goals of CIHR, and we should be proud of that. Nonetheless, we have to make sure the funding's in there to see it through.

To help focus your attention on this issue, I've listed in our brief a few examples of health research projects currently funded by CIHR, and I would ask you to think about the consequences if this work were not continued.

The examples I mention—I won't read them—are from the University of B.C., where Dr. Strydnadka is doing research on superbugs, those nasty little bacteria that don't pay any attention to antibiotics; from the University of Alberta, where Dr. Underhill is doing research on how to detect and prevent birth defects; and from Carleton University, where Dr. MacIntyre is doing research on the prevention and control of epilepsy.

From the University of Montreal, Dr. Lisa McKerracher, who is with me tonight, is an internationally renowned scientist specializing in spinal cord research. I would invite Lisa now to make a few remarks on these issues.

Dr. Lisa McKerracher (Representative, Coalition for Biomedical and Health Research): I'm a professor at Université de Montréal. I'm a research scientist, and I'm really here to give you a view from the working ranks. I'll share essentially the buzz that's going on in the corridors and describe the change we've seen in the last few years. I'm really optimistic about that change.

My colleagues are no longer talking about the new job opportunities arising in the United States; they're talking about the opportunities in Canada through the creation of the CIHR, such as the programs announced this year, the new emerging team grants and new training programs. People are very optimistic. Not only are the research scientists and the university professors optimistic about the future; we're also, more importantly, seeing an optimism from the students who are coming into the lab. They're no longer asking us questions as to whether there will be a job for them in Canada. Instead, they're asking questions as to whether it would be better to go into academic research or into the biotech industry, which is exploding because of the increased base of research funding and the new discoveries that are happening.

I just want to encourage you to stay the course. I think CIHR has been a tremendous program. It's an innovative program, it's a very successful program, and it needs to continue so the optimism and what is just beginning to build will continue to build. There are tremendous economic spinoffs from that research base when those new discoveries are made, spinoffs into the biotech industry that result in job creation. The potential is enormous. I just want to encourage you to keep supporting the program as you have in the last 18 months.

Dr. Barry McLennan: If I can conclude, Mr. Chairman, I'd just like to refer you to page 8 of our brief. There's a diagram there with our recommendation. We're only making one recommendation tonight. I think the issue is so critical to Canadians that we must focus on that single issue, and I invite you to do that.

The recommendation on page 8 says:

    CBHR urges the federal government to remain firm in its commitment to increase the CIHR budget significantly each year so as to reach the 1% goal of $1 billion by the year 2004.

I want you to look at that diagram. This diagram shows a train, the CIHR train, and it's off to an excellent start, as Lisa and others have mentioned tonight. It's on an excellent journey to deliver on its objective.

There's one problem. If you look at that diagram, the supporting structure has a problem. The first two years are there, the additional funding of $65 million for the first year and the additional funding of $110 million for the second year. But there's nothing for years three, four, and five. In other words, that train is going to stall or fall off the track if we don't put the additional funding in right away for years three, four, and five. I don't think any one of you would want that to happen, so we must make sure it does not happen.

As others have mentioned tonight, the additional dollars required to reach that $1 billion target are about $172 million this year—some people said $150 million tonight, but we won't quibble about $20 million—and each of the next two years. Added to the existing budget, that will ramp the total up to that $1 billion.

You say, “$1 billion!”, but I could remind you that other countries are ramping up faster than we are. It would take too much time to go into that here, but I'm sure you have the data. If you don't, we can certainly provide you with it.

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My conclusion, then, is that we must provide this additional funding immediately so CIHR can deliver on its wonderful mandate, which is so important to the health of all Canadians.

In conclusion, in the aftermath of the events of September 11 and notwithstanding the state of the global economy, it's even more important, because of these two things, that the Government of Canada maintain its resolve to vigorously pursue the agenda for research and innovation. The key element of this strategy, as you've heard tonight from other people, is to continue to invest in health research through CIHR.

Thank you, Mr. Chairman. We would be pleased to answer any questions.

The Chair: Thank you very much.

We'll now hear from the Council for Health Research in Canada, Dr. John Hylton and David Hill. Welcome.

Mr. David Hill (Vice-Chair, Council for Health Research in Canada): Thank you very much.

I'm David Hill, vice-chair of the Council for Health Research in Canada. In my day job I'm scientific director of the Lawson Health Research Institute in London, Ontario. I'm also an active scientist with two CIHR operating grants.

I have with me today John Hylton, executive director of the council.

Who are we, then? We're a national non-profit, non-governmental organization. We represent most of the major health charities in Canada and most of its research institutes. Our mission is to promote the health of Canadians by ensuring that Canada is a world leader in health research. Together we raise public funds for health research. In 2000 Canadians entrusted our members with over $300 million in donations. This means that for every dollar provided by CIHR, our members match that with an additional 60¢. Collectively, we are CIHR's largest partner. Our members speak with a common voice about the importance of health research in Canada. We're doing our part and want to do more, but we also believe the government has an important part to play. Simply stated, our position is this: public investment in health research must continue to grow.

Canadians from coast to coast consistently report they want health and health care to be a top government priority. Of course it's expensive and could easily become a runaway expense, but health research is a proven method of planning cost-effective health care on an evidence-based system.

Health research also produces significant economic benefits. Every dollar invested in health research leverages $7 more to create jobs and economic prosperity; $1 million of investment in health research produces 60 jobs. R and D is the engine of the new knowledge-based economy, and health research, particularly biotech, accounts for the largest part of Canada's R and D sector, approximately 50%.

Does health research create jobs and opportunities for Canada's best and brightest and allow Canada to compete in an increasingly competitive global economy? Increasingly, the economic benefits of health research are being felt in every part of the country. In the past, much health research was concentrated in major medical centres and research institutes, but the new fields of health research have seen the economic benefits of health research felt in every region of the country as new technologies have allowed for the creation of virtual research institutes and groups. These fields include health policy and health services research, population health research, and research on health promotion and prevention strategies.

Improving the performance of Canada's health care system and growing a vibrant, competitive, knowledge-based economy help make Canada a better place to live. The burden of ineffective services in economic disparity are always disproportionately felt by the poor and disenfranchised. Growing gaps in social and economic opportunity lead to a variety of social problems that undermine quality of life for everyone. These are the very breeding grounds of terrorism in other parts of the world.

The government's strategic investments in health research, on the other hand, improve the performance of public services and spur economic growth. In turn, this fosters social cohesion and national unity and helps us move towards our goal of being the most just, fair, and equitable country in the world. These are the values we are literally fighting for at the moment.

Our message to the government is this: your commitment to health research is to be commended, but it's essential that the momentum be sustained. Now is not the time to maintain the status quo or, even worse, to reverse course. Through the CIHR, the government has created a highly effective vehicle for ensuring that public investments in health research yield us significant benefits, and these have been documented by many in their briefs.

The CIHR is working, and in fact after a little more than a year it's beginning to achieve its potential. The evidence is clear. The funding provided to the CIHR is resulting in more and better research, in new levels of optimism—as we've heard just now—and commitment from leading Canadian researchers, and in significant economic spinoffs in every region of Canada.

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In January the continuing importance of the government's innovation agenda was highlighted in the Speech from the Throne. In the Prime Minister's response to that speech, the government specifically promised to provide a further, significant increase in public funding for R and D, and the CIHR was signalled for special attention. We applaud those statements.

The commitment to double the investment in research and development over the next 10 years is recognized and appreciated by the health research community, but in the case of CIHR we believe growth must occur more rapidly. Specifically, only about $50 million in funding of CIHR's $500 million budget will be available for new grants next year. This is simply because most of the research grants have three- to five-year periods, so most of CIHR's budget has already been committed. Therefore, in order to sustain current levels of research awards and current success levels in competitions, CIHR will need a significant injection of new resources in the coming years.

An increase in funding of approximately $150 million will be required next year, and a similar level of new funding required for each of the subsequent two years, bringing the total to $1 billion. If these increases are not provided, CIHR will have no alternative but to significantly scale back current grant programs and award levels. Coming so early after the institute's new mandate and after expectations have been built up, this would be a devastating blow to the institute and to the government's credibility. Irreparable harm to the research enterprise in Canada would result.

Of course, once the billion-dollar level has been reached, that creates approximately $200 million in uncommitted funds available each year. This would allow CIHR to sustain levels of activity with only inflationary increases for its budget. At this level, health research funding would represent approximately 1% of current funding on health care services, which is an internationally recognized benchmark Canada seeks to attain. Attaining this level of funding would allow Canada to move out of its current fifteenth place in international rankings, but it would still leave us far short of the fifth-place goal that's been established by the finance minister. Nevertheless, once the billion-dollar level has been achieved, the government will be in a much better position to decide whether to take the innovation agenda to a new level or to maintain funding at a level that will be more or less self-sustaining.

Obviously, much has changed since the Speech from the Throne in January, both economically and in our priorities as a nation. As the government and Parliament move towards finalizing the budget for the upcoming year, many are asking whether the government's commitment to innovation and health research should be reviewed. Our view is that these commitments have never been more important and that they must be honoured to ensure Canada's long-term prosperity. If CIHR does not receive a significant increase in funding in the coming year, the innovation agenda in Canada will stall.

In the short term this will have a dramatic impact on knowledge-economy jobs and economic spinoffs. Leading researchers, especially our brightest young ones, will be discouraged, and some will leave Canada. High-tech spinoff companies will reduce their operations or even fold altogether. In the long term, Canada's competitiveness will be impacted on, and we'll be less able to provide for the social and economic needs of our citizens, particularly those who are disadvantaged.

In the wake of September 11, governments throughout the world urged their citizens not to let terrorism win out and not let it disrupt our daily lives. Our financial advisers tell us repeatedly to focus on long-term objectives. It's this type of sentiment that led the U.S. government to announce unprecedented funding increases for the National Institutes of Health in the wake of September 11. Our message to the Canadian government and to this committee is entirely consistent with these themes. We say, focus on the long-term objectives, and don't allow the urgent to crowd out the important. Set an example by honouring commitments that are as important to our national goals today as they were six months ago.

Our health charities are all impacted by fallen donor confidence at the moment, and we all hope it's going to be short-lived. One of my other responsibilities is to serve on the national board of the Canadian Diabetes Association, and I'll tell you, we're hurting badly at the moment. But we've all resolved in the CDA—and in all the other charities represented—to double and triple our efforts; we must not just strive to maintain the status quo but must provide more help to Canadians and to the Canadian science we support. No terrorists are going to deflect Canadian health charities or Canadian scientists from their mission, and we urge the government to take a similar stance.

Thank you.

The Chair: Thank you very much, Mr. Hill.

We'll now move to the question and answer session.

Ms. Barnes.

Mrs. Sue Barnes: Thank you very much.

Thank you for your presentations. They're all thoughtful, and I don't think anybody around this table would disagree with any of your goals. The reality is fiscal credibility for the government.

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My personal priority is always R and D. You know how involved I was on CIHR. This is something I really support.

The question is, though, if the choice, when the finance minister is sitting down, is between making further increases or—and I hope this isn't the choice—going into deficit financing for this fiscal year, are you prepared for the Government of Canada to go into deficit financing? You've all got your markers on the table, and you are not alone in that. Everybody does who comes to this table, whether they're from highways or whatever.

I believe in the innovation agenda. I believe in the skills agenda. But are you prepared for this government...or would you say, yes, give us all the increase you can within your fiscal capability without going into deficit financing?

We'll start with you, Dr. McLennan.

Dr. Barry McLennan: Good question. I think I'll answer it by saying that all the initiatives that have been laid out have been very important investments—the CFI, the research chairs, CIHR, and all those things. Of course, they're all interrelated. As others have said tonight, and I would agree, CIHR is the key piece. The operational grants to individuals are the glue that will hold them all together and make them work.

You can fill a lab full of equipment on a CFI grant, but if you haven't got people to run it, and to buy the consumables to do it, you can't do the research. So my answer would be that you must look very carefully at your numbers and not waste this investment by not funding CIHR.

Now, if you pushed me to the wall, if you said to me the only way we can fund CIHR is to go into debt, then I'd say go into debt. I think it's that important. I would hope we wouldn't have to do that, though.

Mrs. Sue Barnes: Dr. Hill.

Mr. David Hill: Of course it's an incredibly difficult decision, and I'm very glad I'm not the one who has to make it, but you cannot stand still in an innovation agenda. To leave the status quo is to lose ground, because there is a momentum. To lose that momentum means you have to go back to square one and catch it up again.

We've created a whole tier of young scientists through the Canada research chairs. We've given them the best-quality laboratories and equipment through the Canada Foundation for Innovation. We cannot expect the situation just to stand still for a year and then take it up again. We will lose enormous ground.

So I would say, think of the investments being made in the last two to three years. Do we really want to lose all of the hard work that's gone into creating this innovation platform? Yes, it is a difficult position, but please, please, balance it.

Mrs. Sue Barnes: I'm going to follow up with the two of you. If we had to make a choice—and it would be a difficult choice, since we have been inundated with requests to fund the indirect costs of research—and the choice came down to one between an increase for your operating both CIHR and university research and all your research councils, or starting with an indirect cost subsidy or attachment—whichever way you want to characterize it—where would you go? Or would you try to do a little bit of both?

Dr. Barry McLennan: In terms of research at my home university the indirect costs are a real problem, and have been for decades. I would answer the question this way: We can't solve Dr. Bernstein's CIHR problem of the train stalling on the track, if I may use the metaphor, by paying for indirect costs and not supporting CIHR. So if the choice were down to one or the other, I would say support CIHR. As as important as the indirect-cost issue is, universities have been struggling with this for decades. If you could do both, of course, I'd say start off on the indirect costs. Even if it's only at 10%, just get started.

By all means, though, do not rob Peter to pay Paul.

Thank you.

Mrs. Sue Barnes: Would anybody else like to add to that?

Mr. Yves Savoie: I just want to echo that there is a commitment to $1 billion, and there's strong agreement. I think the question you're asking is about the uncertainty of budgeting in this environment. To that I'd say perhaps the increase for the CIHR is more modest in year one. That may be one of the solutions in dealing with the uncertainty.

The Minister of Finance has been very good at very conservative projections, and I think Canadians have responded well to that. I would say it would be dramatic to not have an increase, because what Lisa has talked about from the research community we've also seen in terms of the health charities. The Heart and Stroke Foundation, ourselves, the Muscular Dystrophy Association, and many others have been engaged very actively in this process of revolution or transformation of the health research machinery.

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I think the response has to be an increase that is significant, because the challenge Dr. Bernstein has now is that he has a mandate much larger than the resources he has.

Mrs. Sue Barnes: Thank you.

Just before I leave, I want to say to Mr. Hatton that I thought your presentation, when it focused on the volunteer sector as opposed to the business, was perfect, and made a very good point to me. I'll remember that.

Thank you very much.

The Chair: Mr. Kenney.

Mr. Jason Kenney: Good luck getting your flight, Ms. Barnes.

Thank you, Mr. Chairman.

I particularly thank all the panellists, because you represent the most important element of civil society—the non-profit and charitable sector.

I have a question particularly for the organizations here that are registered charities, or I suppose the coalitions—there are two, I think—that represent groups of charities. I'd like you to comment—anybody who has a strong opinion about this—on whether you're satisfied with the tax incentives in the Income Tax Act for contributions to registered charities.

I ask this because it apparently continues to be the case that Canadians give only slightly more than half what Americans do on a per capita basis. One could reasonably infer that's partly a function of more generous tax treatment of charitable gifts in the United States.

Could you comment on that? Do you have any specific proposals in terms of enhancing incentives on that side?

Secondly, would you be in favour of a proposal that's been aired to fully exempt capital gains tax from securities that are gifted to registered charities?

Mr. Yves Savoie: Let me just say we applaud the changes that have been made permanent by the Minister of Finance in terms of the gifts of marketable securities. There is still a capital gains tax, but the inclusion rate has been reduced significantly, as you know. There was a sunset clause; that's been made permanent.

The recommendation we brought today is an improvement for people who make large gifts of marketable securities. The reality for health charities and for many voluntary organizations is that the bulk of Canadians give small amounts. I think attention needs to be turned to some incentives beyond the credits now in place for those donors who give smaller amounts, but who stretch.

This could be in the form of an incentive for people to give, say, in the aggregate above $1,000 or above $2,000, beyond the few hundred dollars that are...because there's already an incentive structure in the Income Tax Act. That would be really critical certainly for health charities, but also, I would suspect, for many charities.

On the specific question of the comparator to the American system, there is no capital gain on gifts of marketable securities to American charities. In Canada we've made significant process in reducing the inclusion rate. It has had a very positive impact. I should think if we move to an American situation it would continue to have an impact—that would be desirable—but I think the first response has to be to incent the smaller donors.

Mr. Jason Kenney: In terms of smaller donors, of course, you've been charitable in not pointing out that we in Parliament ascribe to our own political parties a credit of 75% on the first hundred dollars. I've always thought that a glaring inconsistency, but I'll invite other comments.

Mr. Al Hatton: Let me make maybe two quick responses.

About four years ago a number of voluntary organizations worked with the Department of Finance, Mr. Kenney, and we came up with a whole series of options. From that, the one Yves talked about was accepted for large donors, because the Department of Finance could put a figure on it and say, well, we think the hit on the fisc would be roughly in this range. I can't remember the range.

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Through very copious research, looking at the U.S. system and the British system, we came up with a whole series of options. They chose that one. We could dust it off and send it back to you for consideration. Seriously, it was well thought out. The advantages and disadvantages of all of the models were brought forward. We didn't make it public, because we were working with officials and we wanted to make progress on the inside, but that information is available. We can easily get that back for the committee to take a look at, because there were some very creative solutions to this problem.

Ms. Sally Brown (Executive Director and CEO, Heart and Stroke Foundation of Canada): I would only add that the answer to your question is, no, we don't think the status quo is appropriate. We all survive on average donations of about $63 a year, so it's the small to modest donor who is the backbone of our organizations.

Mr. Jason Kenney: Do you mean the average right across the charitable sector in Canada or health charities?

Ms. Sally Brown: Health charities.

Mr. Yves Savoie: It's not significantly different overall. It's pretty consistent. It depends on the province.

Ms. Sally Brown: [Technical Difficulty—Editor]...and given the post-September 11 events, what effect this will have on donor giving in Canada and whether we're going to need changes in the tax act for charitable giving to encourage Canadians to continue to give. That will be an increasingly important issue.

Mr. Yves Savoie: If I may add something, the incentive for gifts of marketable securities makes a lot of sense when there is appreciation in stock portfolios. We are now, I think, inevitably on a downturn, and that's why I would strongly encourage you to incent the small donors who are making gifts from income or pension income rather than from their capital base.

The Chair: Mr. Tirabassi.

Mr. Tony Tirabassi (Niagara Centre, Lib.): My question's been answered, Mr. Chairman.

The Chair: Okay.

We have an option here. We can wait for Ms. Bennett or we can get Mr. Cullen, who always asks questions.

Go ahead.

Mr. Roy Cullen: I was thinking about the tobacco tax increase today. It seems to me that the way the tobacco tax has been structured, with the tax right at the manufacturing gate, the intent is to take away the incentive to smuggle. It seems to me today's increase is probably part of a plan to significantly go further. The problem before, of course, was smuggling, but that has been dealt with in a sense by the policy that's come out. I'm confident our government will continue to ramp up taxes on cigarettes, and hopefully that will be consistent with your mission as well.

Carolyn is back.

The Chair: Go ahead, Dr. Bennett.

Ms. Carolyn Bennett: Perhaps we should just follow that theme. How far are we in getting the taxes back to where they were?

Mr. Kenneth Kyle: Mr. Chair, with your permission, I'd like to table this map, in English and French. It shows tobacco tax rates in all provinces and border states in the U.S.

Is there someone who can circulate this to everyone?

The Chair: I'll ask the clerk to pick it up.

Mr. Kenneth Kyle: As I mentioned earlier, we have a different situation from what existed in 1994, when tobacco taxes were rolled back significantly by five provinces and by the federal government. But we're still way below average prices of cigarettes in the U.S., and there's huge room to manoeuvre upwards. So if Parliament is looking for money, another tax increase next spring would certainly be in order.

If you look at the map, what you need to add on here, from today's announcement, is an increase, not including GST and PST, of $3.20 in Ontario, $4.50 in Quebec, $4.00 in New Brunswick, $4.00 in Nova Scotia, $3.50 in P.E.I., and $1.50 in the other provinces and territories. You can see that Quebec and Ontario are still way below the average prices.

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In Canadian dollars, a carton of 200 cigarettes is still $70 a carton in New York, $61 in Michigan, and so forth. There's a myth out there among the media and a lot of people that we have the same problem as in 1994, but it's absolutely the reverse now because of the settlements by the U.S. attorneys general and the tobacco tax increases by states. We're in a totally reversed position. So if you're looking for cash, we have the evidence; here's the opportunity.

Ms. Carolyn Bennett: To the CIHR cheerleaders, of which I consider myself to be one, if we could get a sentence into the finance committee report that promised it would be $1 billion in 2004, would that do the trick? What kinds of commitments do you need on an annual basis in order to keep doing it?

I think the finance minister's been pretty clear that he's a little concerned in the short term, but he thinks in the medium and long term we'll be fine. I've asked this of other witnesses about the indirect costs of research: If we could do only one thing, would you want us to slow this research dollar down in order to get the indirect costs ramped up?

Dr. Barry McLennan: Mr. Chair, can I try that one?

As I said in answering Sue Barnes' question, if it came down to a choice between funding the operating costs of CIHR or indirect costs, I would reluctantly say fund CIHR and leave the operating costs alone—not that this isn't a terribly serious dilemma for universities. Many university presidents would say—and I'm sure some have been here and said this to you—if you don't do something about the indirect costs at this university, they're going to have to refuse to accept grants. And that's not too far off the horizon, in some cases. But if we're talking either/or here, I would go back to the CIHR.

To answer your question about the numbers, the current budget for the CIHR, including the former MRC and NHRDP pieces, is currently about $484 million—and that's with two increases specifically for CIHR, as you'll see from my graph, the $65 million and the $110 million. Now, just as a side note, there's some debate, I was told two weeks ago, about whether that $110 million is in their base budget or not. If it isn't in their base budget, we have an even worse problem than I thought.

However, let's assume it is. So you have $65 million the first year, and you add $110 million the second year, we're on our way to $1 billion. But we already have the money from MRC. So let's look at what you need this year, next year, and the year after that. You're at $484 million, and you want to get to $1 billion. You need $172 million this year, right now, and next year, and the one after that. If you have $172 million in each of the next three years, it will put you on track for the billion.

That's the answer.

Ms. Carolyn Bennett: Okay.

Mr. David Hill: Let me put it in very personal terms. There's an increase in the application rate in excess of 25%. Clearly, the budget hasn't risen in operating funds to meet that. In the last competition we were at the border of not being able to fund the research that was labelled “excellent”—not “should be done” but “excellent”. If there's no increase, we will likely move high into that range of not being able to fund excellent research.

Now, what do I do when my grant comes up for renewal? What if I'm lucky enough that it ranks as excellent but it can't be funded? I'd have to lay off my staff, whom I've trained for years. That would put me back, not just by one competition but by several years, to build up that critical mass of research expertise again. You cannot simply put it on one side and then bring it back onto the agenda a year later, because a lot of people are going to suffer because of that process.

Mr. Yves Savoie: I'd answer your question quite specifically. You asked, if there's a sentence in the report that says we'll be there by 2004, but we won't do anything this year—

Ms. Carolyn Bennett: No, if there was the commitment to be at $1 billion in 2004, although the increases might be a bit uneven.

Mr. Yves Savoie: The amount of the commitment is already there. It's been made and it's been applauded. The issue is for action.

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Yes, the spikes may be slightly different, but I'd note that the events of the last weeks since September 11 have actually introduced new health research challenges. Beyond the broadening of the mandate that we've already talked about, we're going to have new expectations arising that are linked to the security agenda. I think it's time for action.

Ms. Carolyn Bennett: So you think some of the health research dollars could come out of this new priority for security.

Mr. Yves Savoie: Absolutely.

Ms. Carolyn Bennett: Well, that's a very good thing to say—and to make sure ends up in the report, Mr. Chair.

The Chair: As a matter of fact, for immigration and infrastructure, and most other issues we heard about, it's going to be limited resources, so we're pretty realistic here.

Go ahead, Dr. Bennett.

Ms. Carolyn Bennett: I'd put the following question to all of the health charities and coalitions. The CIHR is based on a partnership model; are the health charities worried that they won't be able to pick up their predictable part of the partnership?

Ms. Carolyn Brooks: From the Heart and Stroke Foundation's point of view, we support $40 million annually into research in cardiovascular. We actually have taken the further step of forming a special fund to try to partner with CIHR, joining all ten of our provinces together, all of those ten foundations. We partner with CIHR. We already have a partnership going with them, with other health charities and with the private sector.

We're ready. Quite frankly, most of our foundation membership is champing at the bit in anticipation of more dollars coming to CIHR. And then we can leverage those dollars up between ourselves and other health charities, and the private sector and CIHR, and just grow the dollars in research. We want that.

Mr. Yves Savoie: I'd echo that. Speaking as the Muscular Dystrophy Association, we have two programs administered in partnership with the CIHR. And the fact of that partnership, the fact of the openness the CIHR represents, has served as a tremendous lever for increased private sector funding.

To come back to Mr. Kenney's question earlier, the CIHR's role is now catalyzing other donor dollars in the health research enterprise. I think that can't be underestimated.

Mr. David Hill: I'd echo that the CIHR's direction is now clearly to try to look for partnerships with CIHR wherever possible to support our fellowships, our scholarships, and our operating grants.

The Chair: Dr. Hylton.

Dr. John Hylton (Executive Director, Council for Health Research in Canada): Mr. Chair, I wanted to say something, in part because when I go back to my board I want to be able to say that I said something when I appeared before the committee of finance. I think I'm the only one in the delegation who hasn't said anything, so I'll take a very brief moment in response to the earlier question about linking it to the security agenda.

If you look at the media and you pull out the names of all of the experts who are being quoted in the media, the experts on bioterrorism, without exception, are individuals who have been receiving support through public investments in health research. Where do experts come from? Where do the experts come from today? Where are they going to come from tomorrow?

Our ability to respond to a whole range of issues, including the issues related to terrorism and bioterrorism, is very directly related to the public investments we make in health research today. If, as a country, we want to have those experts around in Canada addressing these issues now and in the future, we'd better realize that the way we create experts is by supporting them in their research endeavours. We see that today. If we don't continue the investment, we're going to suffer in the future. We'll be more vulnerable as a country, not less, if we abandon our commitment to health research.

I wanted to make that very important point. If you look through the Globe and Mail and National Post—any of the newspapers—look at the list, or go to the CIHR website, you'll see they're people who are being supported by our public investments. That's where our experts come from.

The Chair: If you were quoted in our report, your board would really be impressed, right?

Dr. John Hylton: I'd only say, sir, if you can arrange to make that happen, I'll get even with you some day.

The Chair: Thank you very much.

I want to tell you that, historically, this committee has been very supportive of your causes; you know that. I think we've worked very well together to achieve what we believe are common objectives. But it's during these times of uncertainties that you also have to appreciate the dilemma we find ourselves in.

For me, it's not an either/or situation, by the way. Government expenditures don't deal just with your field. All sorts of re-profiling and reallocation can happen if the situation gets worse. Hopefully it won't, but we always have to build in some contingencies to events.

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Let's not kid ourselves. Nobody was expecting September 11 to have the impact it has, and the economic numbers coming out of the United States are not very positive. When you consider that our economies are more or less integrated, one can understand that there will be an impact on Canada and it's not going to be positive. So we have to be very realistic.

This is actually the last panel for pre-budget consultation. By way of a wrap-up, I'd say there's a sense among Canadians that they don't want us to go back to a deficit position. They want us to honour the $100 billion tax cut. They want us to honour the commitment made on the federal transfers to the provinces' health care and education, and rightly so. They also want us to invest in the area of national security. So there are expenditures.... We actually have to consolidate the gains we've made. As well, a national security issue is coming at a time when there's an economic slowdown. So we have to factor in all these issues.

That said, you can rest assured that you have enough people around this table who believe in what you believe in. And as we write the report, we will be very mindful of your interests, because in advancing your cause we believe we're really advancing the cause of Canadians. We've done that in the past and we'll continue to do it in the future.

When you do read the report, which still has to be written, you will find that we're going to be a little bit cautious. You have to remember that in the past 12 months, if we followed economists in terms of what they said 12 months ago and what they're saying today, they've been revising numbers for the entire year. I'll tell you, as legislators and politicians we don't have the luxury to revise our numbers like that. We have a budget. We have to give the most accurate picture possible. When you look at some of the projections by some economists, there are some who are more optimistic than others and then there are some really pessimistic ones. So we'll have to look at the two extremes and try to figure out where reality is going to lie.

I want to express to you our sincerest gratitude. This is always a very interesting panel and it's a nice way to end our pre-budget consultation. At the end of the day, I think you'll be happy with the balance we'll be able to strike.

Thank you very much.

The meeting is adjourned.

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